The Philippine government is set to employ IT solutions in its active campaign against money laundering (defined as an illegal activity where criminals engage in financial transactions in order to conceal identities, the source, and the destination of money).

The government?s Anti-Money Laundering Act mandates that all financial institutions covered by the law report any suspicious transaction within five banking days, or via telephone if urgent disclosure is required.

At a recent conference at the Mandarin Oriental Hotel in Makati, Anti-Money Laundering Council (AMLC) executive director and lawyer Vicente Aquino presented to several finance corporation heads the prospect of using anti-money laundering software, such as SAS Anti-Money Laundering (SAS AML), to assist them in tracking, identifying, and responding to the threat of money laundering.

?Criminals have been utilizing new technologies to perfect the crime of money laundering. More often than not, those who engage in money laundering are also engaged in drug trafficking, corruption, and terrorist acts. We must also employ new technologies in order to be more efficient in determining suspicious bank transactions,? Aquino said.

AML software

Rowan Bosworth-Davies, director of Fraud and Anti-Money Laundering Solutions at SAS, recognized the gravity of money laundering activities and the need for advanced solutions to counter the illegal act.

?We cannot afford to be complacent. The challenge all banks now face is to build on and enhance existing systems,? Bosworth-Davies said.

Bosworth-Davies, a widely recognized and leading international expert in the field of fraud prevention and anti-money laundering investigation and prosecution, believes money laundering works so well because the global banking system is so efficient.

?Banks never like to share information or opinions with the competition. The only way to succeed effectively in the campaign against money laundering is to use an efficient but cost-effective solution,? he stated.

Technique

The software uses pattern-recognition and data-management techniques to scan quantities of data and flag potentially fraudulent transactions. Although a computer, by itself, cannot define suspicious transactions, it bases its judgment on the models incorporated in the software structure.

The SAS AML software, according to Bosworth-Davies, works by utilizing three levels of customer profiling: current, historical, and peer-to-peer behavior.

To determine a suspicious pattern, the system watches for behavioral patterns, such as rapid movement of funds, average transaction amount, and high-risk region activity; historical behavior; and comparison of a depositor?s behavior with his associates.

?It basically checks for the value, volume, and velocity of a certain transaction,? Bosworth-Davies said.

If the system finds any irregularity in a series of transactions of a singular account, it automatically alerts the bank to report it to the proper authority.

?SAS AML creates an environment where Filipino banks will become very compliant with the Anti-Money Laundering Act,? Bosworth-Davies said.

Aquino, on the other hand, stressed that the SAS AML cannot replace human vigilance and responsibility when looking out for suspicious transactions.

?The existence of your system does not exonerate you from accountability. It?s not the technology that makes the decision, it?s the compliance team that does,? he said.

Reports

According to Aquino, financial institutions have reported 1,486 suspicious transactions from January to August this year -- a 25 percent increase compared to the 1,184 reports covering the same period last year.

Aquino reported that, to date, an estimated US$1.3 million in local banks has been frozen because of possible connection to illegal acts. Aquino stated, ?It?s only in the Philippines where the government is fighting money laundering in all aspects, including the government and the military.?

Globally, an estimated $800 billion to $2 trillion is laundered every year, according to reports by the International Monetary Fund.

Aquino stressed, ?Dubious transactions can happen at any moment, on any day. Resolve doubts in your favor. When in doubt, report suspicious transactions to AMLC.?

Under pressure

Bosworth-Davies, however, reiterated that it is government?s duty to track down suspicious transactions.

?Filipino banks work under pressure from the Philippine government?s rules and regulations on anti-money laundering,? he said. ?Government offices are asking the banks to do the work for them.?

He stressed that the primary function of a financial institution is not to uncover money launderers but to make informed suspicious activity disclosures.

Addressing members of the financial industry, Bosworth-Davies said, ?Your job is not to be detectives but to make profit.?