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Know your data. (Working Wise).

Regulations are a part of life for the banking industry. One regulation demanding attention from banks today is the "Know Your Customer" requirement, which says that banks must be able to identify patterns in transaction processing, to understand who the client is (such as where he or she is from and that financial references are legitimate) and to monitor regulatory watch lists.

Union Bank of California International, which performs international correspondent banking from its New York City location, has sought to streamline compliance by automating the process with software.

Because the bank had been using software products from one company with which it had a good relationship, it approached that vendor about its new needs. But to ensure that it was getting the product that would best meet its needs, the bank first looked at alternatives through a request for proposals, says Charlie Pfeiffer, vice president and senior project manager, of Union Bank of California. The original vendor, GIFTS Software, Inc., came out strongest in terms of content, says Pfeiffer, though he also acknowledges that the existing relationship really helped, because the bank liked "not having to reinvent that wheel."

The system is called the GIFTSWEB Enhanced Due Diligence (EDD), an e-banking suite. The EDD system--which is designed to detect possible suspicious activity and to respond to regulatory subpoenas--requires no special software on the client's PC. It is a purely Web-based application that sits on a separate server. Authorized staff get to the information through the bank's own internal network.

EDD has three main modules: One performs online inquiries against a, database of completed payment transactions, to respond to regulators or subpoenas. The second is a payment profiler module that allows investigators to create profiles to identify transactions containing specific information--such as a company name previously used for a fraudulent account--to detect suspicious activity.

The third module is payment patterning; it helps financial institutions develop payment pattern profiles for each customer account or on a global basis. These patterns can then be compared periodically to locate any variances.

EDD is compatible with several of the most frequently used funds-transfer applications. A user can access it via any standard Web browser that supports 128-bit encryption to perform unique inquiries, create regular reports of suspicious transactions, or develop alerts for deviations from an account's standard pattern of activity.

Beginning in late summer 2001, the company tested the system using an existing, static database that had been created from old information. Says Pfeiffer, "We have taken some of our existing clients and run various searches and profiles against the GTFTSWEB database to make sure that things work the way we expect them to."

Tests of the system on the development database were all successful. "[The EDD product] worked out the way it was set up," says Pfeiffer. "We were looking at two-month-old cases, so the things that came up on the system had already been found on a manual basis."

The EDD system was implemented throughout the international division in mid-January, and the bank held a series of training sessions in three cities to familiarize employees with the application. Part of the implementation phase included an entitlement process to ensure that only users with the proper credentials were able to gain access to data and analyze it.

Much of the early work involved taking the existing profiles, which were created manually, and inputting them into the automatic system. According to Pfeiffer, the employees using the EDD product are happy with the results they are getting thus far and look forward to the time they will save, compared with the manual system, once all of the information has been entered.

Pfeiffer says the bank is making use of all three modules in the due diligence product. Though the system does not provide time-of-transaction data because of privacy issues, staff can collect data in a variety of other ways. "You can create end-of-the day reports on unusual activity, or you can look for accounts with a certain keyword that may have represented fraudulent activity in the past," he says.

For example, the bank's compliance officer might receive an e-mail notification that a report has been generated. The officer will then access the EDD application and retrieve the report. If the compliance officer sees any evidence of fraudulent activity, he or she will file a Suspicious Activity Report with the federal government.

Pfeiffer says that using the system will help make the bank's due diligence operations more efficient: The system will free up some staff resources to do more analytical work, instead of both data gathering and analytical work They will be able to do live searches on the data; the system will do the legwork."

(For more information: Paul C. Gdanski, senior sales executive, GIFTS Software Inc.; phone: 646/865-1301, ext. 240; e-mail:
COPYRIGHT 2002 American Society for Industrial Security
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Copyright 2002 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Union Bank of California International automates international correspondent banking
Author:Premo, Rita
Publication:Security Management
Article Type:Brief Article
Geographic Code:1USA
Date:May 1, 2002
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