Cap, Gemini, Ernst & Young and Norkom, an Ireland-based analytics provider, have entered the realm of anti-money Laundering with the introduction of a new product called Money Laundering Detection and Prediction (MLDAP). MLDAP will help securities and investment firms comply with the recent USA Patriot Act. To create MLDAP the partners enhanced Alchemist, Norkom's risk management and customer-relationship-management software platform, to include anti-money laundering detection.
The result of the alliance is a technology that monitors and tracks historical investment patterns and identifies suspicious behavior, using an unlimited set of rules and variables designed by both CGE&Y and Norkom and those mandated from government agencies. For example, a rule might state that if an investor profile includes a specific name, origin from a specific country and investments of above a specific amount of money, the transaction should be considered "suspicious" and investigated further. In addition, the client can customize rules to include industry or geographically specific differentiations among financial-services firms.
Even after rules are set, Jim Scurlock, Senior Manger for CGE&Y's Financial Services Industry, says, they can self-evolve into new rule patterns both to reduce false accusations as well as keep up with the sophistication of terrorists. Rules can also be constantly and immediately updated by compliance officers. "If someone thinks that there is a new way that things ought to get looked at either by experience, intuition or however they derive it, they can create that rule mid-day and get it going right away," Scurlock promises. Lastly, a compliance officer can access reports on activity at any time, allowing the officer to keep a close and accurate watch, as well as submit audits to any governing body.
Aside from compliant middleware technology, such as IBM's MQSeries or Tibco, MLDAP is an all-inclusive package, Scurlock says, adding that most institutions may already use a compliant middleware. Norkom has developed the database for MLDAP and CGE&Y will provide systems integration to existing databases and government feeds such as Office of Foreign Assets Control. Both follow up with maintenance and consultation if necessary."We've called this a solution set," clarifies Scurlock. "The intent here is that it is a complete solution, including the computer, the software, the systems integration, consulting and strategy."
Scurlock, says as a consulting firm, CGE&Y had the expertise in systems integration and IT necessary to adapt Alchemist into an anti-money laundering system. As for the partnership with Norkom, Breffni McGuire, senior analyst, TowerGroup, notes, "It is advantageous for a technology company coming into the U.S. market to work with a global company such as CGE&Y. In this (tough economic) environment, large and mid-tier firms like to work with companies with proven track records."
In an unstable economic environment, brokerage firms may be hesitant to justify the $1 million price tag on MLDAP. In addition, the market environment may prove challenging as competitors such as Searchspace, Mantas and Prime Associates have already staked their ground in the AML space. However, Scurlock points out that the MLDAP technology can be used to replace the individual "boutique" risk management products. MLDAP, he says, can detect risks such as insider trading and accounting deviation, therefore, bringing significant cost savings by tying together up to 20 separate risk-management systems.
Donna DeMartino, a senior manager with Deloitte & Touche's Analytic& Forensic Technology Group, agrees that AML technology needs to have other components to make the investment worthwhile for firms the current economic climate.
"Initially they are looking for the module to comply with the Patriot Act immediately," she explains, "but if you provide a suite that has these interchangeable modules, then that does become inviting."