Swiss anti-money laundering rules boost software sales

The late Nigerian dictator, Sani Abacha, hid huge sums of money in Swiss banks under a variety of names Keystone Archive

With an end-of June regulatory deadline approaching, the demand for software to help comply with Switzerland’s new, tougher anti-money laundering regulations is picking up.

This content was published on January 20, 2004 - 09:40

Swiss software suppliers report sales are increasing for products used to monitor transactions and applications to identify “unwanted” or risky customers.

Last year banks in Switzerland focused on transaction monitoring systems.

“Initially, they thought it would be an in-house job for the IT department,” said Laurence Jacobs, chief science officer of kdlabs. But the task has proven more difficult in practice and as a result, banks are turning to the likes kdlabs, Avaloq, and ILOGs to find solutions.

The banks’ IT services might have the technical know-how, but an understanding of investigative techniques used to find patterns of money laundering is also required.

“Many banks have been watching and waiting to see what the industry would do and are now starting to make buying decisions,” according to Urs Bigger, who heads up the Swiss Association of Compliance Officers.

Money launderers

As for the other side of compliance, “Know your Customer” (KYC), demand is noticeably stronger.

KYC means banks and financial intermediaries need to be aware of potential money launderers. They have to run regular and thorough checks of the names of their clients against lists of politically exposed persons (PEP), as well as people facing financial fraud and criminal charges at home and abroad.

The regulation applies to banks, credit card companies, insurance firms, and other financial institutes.

Luka Müller-Studer, a practicing lawyer and co-founder of KYC Spider says that the need to manage the increasingly complex information sources for PEPs and terrorist lists made his firm decide to act as an information broker, making a number of PEP databases available through a single search module.

The company will offer access to its database products on a pay per view method or subscription price.

As with transaction monitoring, the banks initially thought they could rely on in-house search solutions or access to existing databases, such as World-Check, putting the data into a spreadsheet and running a search.

Manual work necessary

But that underestimates the complexity of proper name search, according to Manfred Kulmitzer, Country Manager for DeltaVista AG.

Deltavista is building on its successful credit check database business to offer anti money laundering name check databases.

“There is a lot of manual work still necessary even with such solutions and banks need an intelligent algorithm with sophisticated name differentiation that can simplify the search,” he added.

“The KYC lists and data contain many foreign names with different spellings, the lists provided by the FATF or the foreign governments are sometimes incomplete or mis-spelled or transmuted,” explains Kulmitzer.

Kulmitzer says name search know-how has to be built in because the typical compliance officer is a legal expert, not necessarily an information retrieval specialist.

by Valerie Thompson

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