Case Study

In addition to personal and commercial banking, the bank offers specialised products to finance industries, agriculture, capital markets and start-ups. It has a network of nearly 1000 branches across the country, and assets worth nearly US$550 million.

Planing to expand its operations overseas, the bank decided to proactively address the growing threats posed by money laundering activity across the globe. It wanted to implement an anti-money laundering system (AML) that would not just comply with regulations by detecting suspicious transactions of money laundering and fraud, but also to gain the business benefits that go far beyond alleviating the pain of regulatory noncompliance.

The challenge
The bank was one of the earliest in India, in 2003, to take steps toward implementing an AML system. The Reserve Bank of India (India’s Central Bank) had still not spelled out clear guidelines at the time, leaving banks with little clarity on the extent of monitoring required. The period of implementation coincided with rapid regulatory changes in this area, when banks found themselves in an increasingly demanding and challenging regulatory environment.

The bank appointed a consultant to help design an AML strategy. First among the decision criteria was the need to have a global product that could be tailored to meet Indian requirements. Second, the system needed to facilitate seamless integration with the bank’s core banking solution to help realise its objective of a comprehensive and centralised AML system.

The solution
After detailed evaluation of available solutions, the bank decided to implement AMLOCK (previously called BankAlert), beginning with a business process study. As AMLOCK was a satellite system to the bank’s core banking solution, an interface had to be built to receive the source data. One of the bank’s foremost concerns was to ensure that the data structures of the core banking system were perfectly matched with those of the AMLOCK system, so that the AML system accurately reflected all details of the source core system.

As all branches were not covered under core banking, it was decided to install AMLOCK for whatever branches were ready at the time and to gradually extend the coverage to more branches, as and when they went live on core banking.

An essential component of any AML solution is comprehensive customer historical data for every account to ensure that benchmarks or threshold limits set for a particular customer are in keeping with the account history and, therefore, are better aligned with the end objective. Since the core banking system was itself being rolled out at that time, build up of historical data, required for effective benchmarking, demanded longer time. Another plan was the creation of one common identity for all accounts held by the same customer that had to be taken up afresh.

Once AMLOCK was installed, beta testing and enhancing existing functionalities in the system formed a significant part of the deployment process. Subsequent to the first version installation, six service packs were released as part of continual enhancement. The entire workflow of the Case Manager, for instance, was revamped and new hierarchical levels were introduced. Existing reports were made more user-friendly and new ones developed.

Operational volumes scaled up from 20,000 transactions a day to over 1,600,000, which corresponds to approximately 2,100,000 customers aggregating to 2,300,000 accounts covering 184 products and 28 money instruments.

The bank entrusted a third-party with its User Acceptance Testing (UAT) of AMLOCK. Subsequently, AMLOCK was also included in the Bank's Information Security Audit conducted by its consultant. The testing team further examined the software for its operational accuracy, running checks on data consistency and integrity. User management and access grants, security validations, password management and control were re-examined. Encryption of imported data, database level security and the possibility of unauthorized manipulation were also dealt with in detail.

Intensive staff training was a key part of the AMLOCK implementation. Users were provided exhaustive and hands-on training to gain familiarity with the capabilities. The clarifications provided during the UAT were shared with the user group. The entire project was completed on schedule and stayed on budget.

Benefits
With an integrated AML system, the biggest benefits realised by the bank were the ability to detect suspicious actions across transactions and to apply different monitoring threshold limits to different customer groups. Enhanced due diligence functionality has enabled the bank to identify links between its customers, which were not established in the past, leading to an increased understanding of its customer base.

The bank’s staff members, who previously performed manual processes, are also now able to significantly reduce detection and inspection time, thus boosting their productivity. With AMLOCK in place, the bank is now poised to expand its operations and predicts continued success in their next decade of operations.