Money Laundering in India

In a small branch of big bank advances shot up 100% in a particular year. Loan portfolio contained bill discounted. The perpetrator of the fraud in collusion with the branch manager opened 36 different Inland Letter of Credit and Bill discounted. The bills were raised on one party by other and circular reference was never completed. Every company had different management but the fraud was unearthed when the Demand Draft of three parties was collected by a single person

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AML Software Checklist

This is the time when the many of the banks in India have implemented the Anti-Money Laundering solutions, many software companies have come up with their own products and some of the software companies have also acquired the companies in the domain of Anti Money Laundering.

The first thing that the bank needs to know while scanning through the AML vendors is the experience of implantation in the Indian Banking industry. Generally the bank which is implementing the software looks for those vendors who have implemented the solutions for their peers.

Determine which aspect to deal
This has to be the first step for any risk-based AML solution implementation approach. Depending on the risk which you feel is most important, you will narrow down the search for possible vendors. Generally there are four types of features available – Behavior pattern analysis, KYC Reporting, Transaction analysis and client risk assessment if the banks don’t have interest in knowing the suspicious transactions and is only interested in KYC norms the bank should look for the vendors who have strong reporting system inbuilt in their software.

Do your due diligence on the service provider.
Research who is behind the company and what his/her expertise in the field of banking and compliance is. Remember, you are relying on his/her expertise.This is the time when many of the Indian banking players have implemented the AML solutions for various purposes and some of the vendors are also from India,hence it becomes easier to get the information regarding the service providers and due diligence is a comparatively easier job.

Find out too good to be true statements
In 2002, the Associated Press stated that a vendor had "15 of the nineteen terrorist hijackers in its database prior to September 11". As we all know, statements that sound too good to be true usually are. Another vendor states in its material that its search combines information from over 400 million files/records. Are there really these many records related to frauds even on Google which searches almost all of the websites that are technically sound. One needs to identify the statements in the marketing material which are too good to be true.

Be as specific as possible
Imagine RBI asking the data from your bank regarding the KYC solution and you answering we monitor several terrorists and Politically Exposed persons.It is very essential to know the specific statistics about the data that you are paying for. You need to know exactly what kinds of information is included in your product. At least, request a list of the databases for your own records.The type of source - governmental sources, newspaper articles, or privately maintained newsgroups - determines the quality of the database, that's why you need to know.

Check a prepared list of names
In addition to this when banks get many proposals from the AML vendors, first thing that you can do to validate their claims is to prepare your own list of app. 50 known terrorists, money launderers, fraudsters and use it as a sample to test the products. If these names are found in the list of the AML solution then it passess the first stage.The softwares can be ranked based on the % of entries appearing in the databases of the AML vendor. This allows you to quickly identify strengths and weaknesses in the vendor's product.