KYC Approach Is Not Enough For AML

by Rajendra Chaudhary    May 15, 2006

With the constant intake of technology and never ending job of integrating key business processes with new IT initiatives, compliance matters, competition, IT managers can barely afford to breath at a normal pace in the fast and furious world of banking.

To discuss some of these challenges facing the banking industry, top IT minds from the fraternity congregated at the Second Annual CTO Summit organized by Banknet India where risk management and Basel II compliance emerged as two top priority matters concerning the Indian banking industry.

Panelists at the event agreed that as the deadline to start implementing Basel II inches closer, Indian banks needed to get their act together and step up their efforts to become Basel II ready. Commercial banks must see to it that they have tools and provisions in place that ensure comprehensive data collection and analysis, which is the foremost criteria for Basel II compliance.

Basel II accord lays increased emphasis on regulation & risk management and banks that can manage risks effectively will not only maintain a rock-solid financial structure but also gain an edge over the competition.

Anti Money laundering (AML) was another topic of interest, that generated quite a bit of interest and some new theories surfaced during the congregation.

With banking becoming increasingly mobile, one of the key concerns of financial institutions is AML. With SEBI and RBI pushing forth the idea of AML compliance, the business of AML software is poised to hit a new high.

According to Ravi Duvvuru, Group Head (compliance), Kotak Mahindra Bank, “Since most of the AML solutions currently deployed at banks are at the back end, it is difficult to decipher shady behavior at the front end and a lot of things can go unnoticed. We need visibility at the front end where critical transactions take place and good AML solutions can do that.”

Hanuman Tripathi, MD, Infrasoft Technology, a company specializing in AML software had a slightly different perspective. According to him conventional AML software are not enough to enforce visibility into transaction processes.

According to him, “A good AML software can be of immense use to banks which have a large network of branches spread across different geographies. Banks can’t afford to relax with the thought of having a know-your-client (KYC) in place. Modern AML tools need to change from conventional KYC methodology to risk assessment matrix and track customers’ current transactions patterns as opposed to his account activities of the past.”

Following the theme ‘Transforming through Technology’ the event also witnessed engaging discussions on business continuity, business intelligence, CRM, payment systems and implementation of core banking solutions among others.