To serve and protect

Compliance and risk are currently at the top of the agenda for many banks and financial services firms. Torsten Mayer of TONBELLER AG talks to Steve Coomber about a viable solution to the cost and complexity of implementing systems to fight white-collar crime.

Whether it is the EU’s Third Money Laundering Directive, the Market Abuse Directive or MiFID, a swathe of legislation, rules and regulations are making the compliance environment of banks and insurance companies much tougher.

No wonder there is an increasing demand for integrated compliance and risk management solutions, says Torsten Mayer, managing director of TONBELER AG, a German-based firm that supplies solutions for fighting financial crime and terrorism financing, as well as business intelligence.

There are many key factors that affect the selection and implementation process of compliance systems. One is the level of integration across the various discrete risks.

A good way of addressing this, says Mayer, is through a modular approach, based on TONBELER’s underlying technology Siron®, which has more than 35 years in the field of data analysis and data processing.

‘TONBELER provides a suite of comprehensive and integrated software for conducting risk assessment and combating illicit activities such as money laundering, terrorism financing, fraud and market abuse. The software solutions are built modular and can be added every time a customer needs more functionality. That leads to a tailor made solution for banks.’

Take market abuse and insider dealing, for example, significant issues for brokerage and securities firms, especially in the light of the recent media spotlight on rogue trading such as Societe Generale’s Jerom Kerviel, who achieved trading losses of $7 billion. ‘As part of our product suite we provide a market abuse module that identifies trading patterns, based on a trader’s typical transactions, the currencies, countries, volumes, and other parameters for example, linking activity to market announcements (KYC) due diligence set by the client. Then, if these are exceeded, the suspicious trade will be flagged immediately, identified and investigated by the risk management or compliance officer.

‘Under Basel II, banks are required to set aside additional capital for fraud losses, so this is a significant customer issue. Fraudulent attacks are costly in terms of reputation and lost revenue. So banks have to implement systems which will help to minimize the risk of being affected by fraud.’ says Mayer. He cites the Association of Certified Fraud Examiners estimates of the cost of fraud to the world wide economy – nearly $400 billion a year – as evidence of the size of the problem.

Another area of concern is the identification of “politically exposed persons” (PEP s) as required by the Third Money Laundering Directive. Transacting business with PEPS without the appropriate Know Your Customer (KYC) due diligence may result in a substantial fine. PEP detection is challenging because of the huge amount of data involved. ‘When you check a PEP database which has about one million entries, and match it against a bank’s client database, 3–5% will have similarities or look like a PEP.

With a client list of millions, that could add up to 50,000 people or more.

‘Our solutions help to simplify the process to check potential PEPs against other risk activities, such as corruption, money laundering, and fraud and an alert is only generated if a client is suspicious after this process. That reduces the number of people you have to check manually by up to 95%.’ With compliance and risk assessment solutions, ease of implementation is also important, but with experience of over 700 projects, TONBELER is well prepared for a fast and driven integration and implementation time,’ Mayer says.

‘We are completely platform independent. The bank can take our software and run it on almost every database or infrastructure. Our solutions receive data directly from operational systems and from existing data warehouses via interfaces. Ready-to-use interfaces are available for a number of core banking systems. We also provide any support needed, technical support for the product installation, data extraction support, a training hotline, and also business consulting – so we have lawyers, risk and compliance experts, former anti-money laundering officers – in order to help the client to fulfil their requirements in a fast, professional way.’