By Cory Levine, Wall Street & Technology
In the modern age of electronic workflow and data management, paper-based processes increasingly are becoming a liability, which is why it was surprising to hear about the large full-service financial services institution that brought together compliance and fraud prevention vendor Actimize, and information services provider LexisNexis.According to Debra Geistner, director of fraud prevention and compliance solutions for LexisNexis, in order to comply with customer due diligence (CDD) requirements of the USA Patriot Act and other regulations, the institution (which she declines to name due to nondisclosure agreements) was conducting and printing out LexisNexis searches and filing those printouts that were associated with customer alerts. When the firm released a request for proposal (RFP) for an automated solution to manage this information, LexisNexis paired with Actimize to develop a combined solution for automated due diligence and risk scoring, which it unveiled at a gathering of clients and partners in New York last week.
The CDD solution mines LexisNexis public data sources and uses Actimize's established risk models to give customers a risk score and generate alerts triggered by events such as account openings, renewals and updates. The Actimize risk models generate a client risk score based on factors including country of origin, residence and occupancy, business type, net worth, and account history, all of which have configurable thresholds.
While the USA Patriot Act, having been signed into law in 2001, can be considered a relatively mature regulation, the urgency behind this solution has risen recently as regulators have dealt with the breadth of the legislation's stipulations individually over time, and now have turned their attention to the Act's CDD requirements, explains Geistner. "First there was the [anti-money laundering] monitoring requirement, and financial institutions rushed to try to solve that problem. And then they went on to the next problem and the next problem, and CDD kind of got left behind," she says.
By unifying all available public information about potential and existing clients, LexisNexis and Actimize hope not only to achieve regulatory compliance, but also to bring to light the efficiencies of unified customer profiling throughout the business.
"Once you fill in the blanks and you send a report to the authorities, there's little else in the form of value to the institutions," says Guillermo Kopp, VP of cross-industry research at TowerGroup. "The customer due diligence solution takes it to the next level by pulling information that is available in the market place ... and also creating the ability to turn the information around and fulfill more than a regulatory purpose, to do something that is adding value to the business."
"This is about putting together the identity of the client in a more holistic manner using publicly available information."