Wall Street & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Trading Technology

00:40 AM
Connect Directly
RSS
E-Mail
50%
50%

Taking AML to the Next Level

Investment-management firms are beginning to leverage AML technology for more than anti-money laundering.

Like most financial-services firms, Chicago-based Mesirow Financial and its compliance officers take anti-money laundering (AML) seriously. Brad Busscher, general counsel at the firm, says efforts include "evaluating clients and making sure we are comfortable taking them on." But, unlike some firms, Mesirow doesn't rely on a single AML technology platform. Rather, it combines several different processes and technologies to meet its compliance obligations.

At the front end, that includes running clients' names through McDonald Information Service (MIS), a New York-based data service that tracks names and identifies known traffickers and terrorists, to comply with the USA PATRIOT Act and the compliance requirements of the Office of Foreign Assets Control (OFAC). "It's a system that we bake each client through. I think it's a good first step, but we still have obligations to dig deeper," Busscher says.

"Part of the challenge is that we have a number of clients offshore," he adds. "We need to drill down further." So the firm uses the Internet to confirm identities and corporate structures and ensure that the clients are who they say they are.

"Once the client is in the door, we have a variety of exception-based tools to monitor day-to-day trades," Busscher continues. He explains that monitoring includes reviewing money movement and wire transfers, as well as watching for unusual activity. At the end of the process, Mesirow, which manages $16 billion in assets, is in a position familiar to many investment firms - its compliance department has acquired a wealth of knowledge about its clients through disparate means. Despite the intensive data gathering efforts, however, little use is made of the information outside of AML purposes.

If AML vendors have their way, though, investment-management firms will soon adopt AML platforms for more than anti-money laundering activity. Investment firms need to leverage AML technology to do everything from pure trade and mutual-fund compliance to customer-relationship management, the vendors assert.

"Why not?" asks Jonathan Winer, a former U.S. deputy assistant secretary of state for international law enforcement and a partner in the Washington office of Alston & Bird, LLP. Winer, who specializes in legal issues involving data protection and management, and information security and privacy, says, "The amount of information you're gathering on know-your-customer rules requires you to understand in some depth the nature of a client's business. It allows you to engage in a fair amount of market segmentation."

Information about a client's trading patterns, accounts and money movement can be used internally for marketing initiatives, he says. "There's nothing in the law that precludes you from doing it within the [organization]."

That's what AML vendors are banking on as they expand their offerings and try to up-sell firms to leverage AML platforms. But are investment firms ready to pursue the strategy?

Greg Henderson, program manager for compliance solutions at SAS in Cary, N.C., says that while firms should be looking to leverage their AML investments, most are still "very focused on implementing AML as an application." He says the larger firms are "further ahead when it relates to AML," but the mid-size and small firms are still in the process of automating their systems for AML compliance and aren't ready for the next step yet.

Previous
1 of 2
Next
Register for Wall Street & Technology Newsletters
Video
Exclusive: Inside the GETCO Execution Services Trading Floor
Exclusive: Inside the GETCO Execution Services Trading Floor
Advanced Trading takes you on an exclusive tour of the New York trading floor of GETCO Execution Services, the solutions arm of GETCO.