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July 2013

FircoSoft Vendor Highlights Report

2© Copyright Chartis Research Ltd 2013. All Rights Reserved

About Chartis ResearchChartis is a leading provider of research and analysis covering the global market for risk management technology. Our goal is to support enterprises seeking to optimize business performance through better risk management, corporate governance and compliance. We help clients make informed technology and business decisions by providing in-depth analysis and actionable advice on the broad spectrum of risk technology offerings. Areas of expertise include:

• Credit risk• Operational risk and Governance, Risk and Compliance (GRC)• Market risk• Asset and Liability Management (ALM) and Liquidity Risk• Financial Crime• Insurance risk• Regulatory requirements including Basel 2, Basel 3, Dodd-Frank and Solvency 2

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Table of Contents 1- Executive summary ........................................................................................................................................... 5 2- Market analysis .................................................................................................................................................. 6

2.1 Drivers for change ........................................................................................................................................ 62.2 Technology requirements.............................................................................................................................. 7

3- Leading practices from FircoSoft ...................................................................................................................... 93.1 Technology capabilities ................................................................................................................................ 93.2 Organizational capabilities ......................................................................................................................... 123.3 Future direction .......................................................................................................................................... 13

4- Case studies ..................................................................................................................................................... 14 5- Final thoughts .................................................................................................................................................. 16 6- Further reading................................................................................................................................................. 17


List of FiguresFigure1: FircoSoftfilteringframework ............................................................................................................. 9

Figure 2: FircoSoft dashboards .......................................................................................................................... 11


1- Executive summaryInthepast,manyfirmsfeltpowerlesstopreventfinancialcrimeandsimplywroteitoffasthecostofdoingbusiness. In the last two decades, however, the combination of greater regulatory pressure and the increased costsoffinancialcrimetofirmshaveledtofinancialcrimemanagementbecomingamuchhigherpriorityforfirms.

Inparticular,regulatorshaveputincreasedpressureonfirmstodomoretopreventterrorismfinancing,money laundering, corruption, and tax evasion. As these requirements have become stricter and the volume of transactionshasincreased,ithasbecomeevermoredifficultforfirms’financialcrimemanagementsystemstomeettheserequirements.Thecostoffailurehasgoneup,throughhigherregulatoryfinesandincreasedpublicscrutiny leading to greater reputational risk.

Firms need to adapt to this new world. In the past, they had focused on processing a relatively small number of transactions, on a batch basis, and accounts could be fairly easily traced. However, the rise of mobile and online banking has raised the volume of transactions, the speed at which they take place, and the ease of anonymity. Thesefactorsmeanthatfirmsneednewapproachesandtechnologysystemsfortheiranti-moneylaundering,anti-corruption,anti-terrorismfinancing,economicsanctions,andtaxevasionprograms.

The widening of regulatory scope has also increased the volume of transactions and accounts that need to be screened. This will place increased pressure on resources in organizations that rely on manual review and workflowprocesses,creatingmuchhighercosts,muchlowerefficiency,andgreateroperationalrisk.Toprocessgreaterflowsofinformation,firmswillneedtechnologysolutionsthathavebeenspecificallydesignedtomeetcurrent and future challenges of screening processes, providing the right balance of feature sophistication and high-volume processing ability.

Asfinancialcrimetechniquesevolverapidly,state-of-the-artdetectiontechniqueswithsophisticatedfilteringare necessary, with powerful, scalable screening abilities to enable the processing speed that operations require. Firms also want to avoid overwhelming volumes alerts generated by increased screening volumes. To meet thenewfilteringvolumes,refinedandflexibletuningofrulesisrequiredtominimizefalsepositivesandmaintainmanageablealertrates.Solutionsalsoneedarapid‘productionmode’toeliminatefalsealertsquickly,while providing deeper investigation tools for potential true alerts. Automation of predictable steps should be considered, such as decision reapplication or routing alerts directly to the most appropriate reviewer.

Thisoftenmeansfocusingonbest-of-breedsolutions,ratherthan‘one-stop-shops’.Whilemanyfirmswanttoimprovetheiroverallfinancialcrimesystems,theyknowfromexperiencethatbroadimplementationsarecostlyandtaketime.Wherefirmshaveaspecificneedforimprovedscreening,aspecializedscreeningtool,withfocused development of real-time scalable capabilities, may be preferable to a one-stop-shop vendor with less sophisticated screening capabilities.

Thisreportcoversthetechnologycapabilitiesandsystemsthatfirmsneedtoadapttothischangingenvironment,withafocusonwatch-listfilteringsystems.Thereportcoversnewfunctionalitiesthatfirmsneedtoimplementto keep pace with technology changes and regulatory requirements, including real-time capabilities, risk-based approaches, and the ability to increase scale. This report also covers practices and technology solutions available fromFircoSoft,aproviderofwatch-listfilteringsolutions.ChartisbelievesFircoSofttobeoneoftheleadingvendorsinthefinancialcrimemanagementmarketplace.


2- Market analysis2.1 Drivers for change

Financial crime management, and anti-money laundering in particular, has gradually increased in importance forfinancialinstitutionsandotherorganizationssinceitfirstcametoprominenceasacompliancerequirementinthelate1980s.Inparticular,overthelastfiveyearstherehasbeenareneweddriveforimprovedanti-money laundering programs and systems. A number of internal and external factors have driven this process bychangingthesituationandthefinancialcrimemanagementchallengesthatorganizationsface.Thesefactorsinclude:

• Technology factors – These primarily include the growth of new payment channels (mobile payments, online payments), the increased technological sophistication of criminals, and issues around scalability stemming from increased data. First and foremost, there has been considerable growthindigitalbankingchannels,withmobileandonlinebankingnowoccupyingasignificantportionofalltransfers.Thegrowthofthesechannelsmeansfirmsneedtoprocessamuchgreaternumberoftransactionsatamuchfasterpace,requiringamoreadvancedapproachtofiltering.In many cases, criminals have moved faster than banks to exploit these technologies. Criminals are adept at utilizing the anonymity of online accounts to construct false identities and hide illicit transactions.Firmsneedgreatercross-channelandonlinefilteringcapabilitiestomatchcriminals’growing sophistication. Finally, these channels, combined with the impact of SEPA in the EU and thegrowthofAutomatedClearingHouse(ACH)intheUS,haveincreasedtheflowofdataaroundtransactions,requiringfirmstoprocessagreatervolumeoftransactiondata.

• Stricter regulation and supervision – The regulatory pendulum has swung back towards stricter supervisionthroughoutthefinancialsystem,witharangeofnewregulationsemerging.Recentcompliance failures around sanctions and money-laundering have strengthened this trend. The publichasdemandedactionandregulatorshavehandedoutheavyfinesaccordingly.Otherfinancialinstitutions,suchasinsurers,andnon-financialinstitutionsarealsoincreasinglyrequiredtohaveKYC and CDD procedures. In addition to stricter supervision for money laundering, anti-corruption andtaxevasionregulationhavealsoincreasedtheburdenplacedonfirms.TheUS’snewanti-tax evasion legislation, FATCA, has received the most publicity because it requires banks to do much more to track the accounts and transactions of their customers. There is also much stricter supervision and stronger requirements around tax information exchanges, anti-bribery, and anti-corruption legislation. As the regulatory pendulum has swung back, supervisors are strengthening theirfocusontheseareas.Dealingwithalloftheseregulationscanbedifficult,and,asaresult,compliance consultancy is growing within banks.

• Greater customer demands – Customers now expect a higher standard from banks, both in terms ofcustomerexperienceandinthebank’sethics.Theincreaseduseofonlinetransactionshasledcustomerstoexpectquick,efficient“one-click”transactionsandconvenient,fasttransfers,without barriers. Firms need to strike a balance between facilitating a good customer experience and maintaining security, as customers also like to feel that their bank is secure and is not used to facilitatemoneylaunderingforcriminals.Firmsthereforeneedstronganti-financialcrimesystemsthat have low false positive rates and do not create too many barriers for legitimate customers.

• The increased costs of financial crime – These factors have increased the cost of failure to prevent illicittransactions.Growingpublicmistrustoffinancialinstitutionshasincreasedthecostofreputational risk, as failures now receive greater publicity and attract more criticism. Regulatory risk hasalsoincreased,assupervisorsaremorewillingtohanddownheavierfinesandimposesanctions.Additionally, the risk of losses from criminals has increased as they grow more sophisticated and pose a greater threat to banks.


2.2 Technology requirements

Together,thesechallengesaroundfinancialcrimehavecreatedanewsetofrequirementsforfinancialcrimesystems,inparticularforwatch-listfilteringsystems.Firmsneedtoensuretheirtechnologysystemskeeppacewithtechnologychangesandcompliancerequirements.Therequirementswillbedifferentforfinancialinstitutionsincomparisontootherfirms,astheyfaceahighernumberoftransactionsandstricterregulations.Financialinstitutions’requirementsinclude:

• High volume capability/scalability• Integrated and expert cross-channel functionality• Real-timefiltering• Risk-based approach• Low false positive rate• Increased productivity with online features to enable production-mode decision processing• Improvedalertmanagementrequiredviasmarterworkflow.

Non-financialorganizations’requirementsinclude:

• The ability to screen against negative news• Anti-corruption lists• Flexible systems to meet different needs in different locations• Centralized systems to make the most of limited compliance resources• User-friendlysystemssothatfirmscanprocessalertswithaverysmallteam• Real-timeintegrationwithoperationalsystem(e.g.CRM),alsotoimproveefficiency• Outsourced list management (automatic vs. manual list management)

However, while the requirements differ, there are common features which both will require. These common requirementsstemfromtheneedtodomorewithlessandtocarryoutfilteringinrealtime.Bothfinancialandnon-financialinstitutionsfacemorestringentcompliancerequirementsandtheneedtoprocessmoretransactions more quickly.

At the same time, compliance resources are stretched. Technology systems therefore need to be user-friendly and have a degree of automation to help compliance professionals complete their tasks quickly and easily. Dedicated filteringsolutionsmaybemorecapableofmeetingtheserequirementsthanbroaderfinancialcrimesolutions.Inparticular, best-of-breed solutions will be more focused on enabling real-time screening of increased transaction volume,whichisthekeyrequirementforfinancialandnon-financialinstitutionsalike.

Important foundation elements for a technology system will primarily involve getting the data in correctly. This includes both having a robust data management system for recording and processing transactions and ensuring that the system can upload and update watch-lists regularly. Detecting suspicious transactions relies on taking large amounts of incoming data and analyzing it at low latency. In a high data volume world, it is now an even greater requirement.


The data management system should be able to take in transaction data quickly and consistently, be able to reconcile data from different channels, be able to take unstructured data, take data from third party databases, and take regulatory feeds and databases from different jurisdictions. Storing data in a consistent format will benecessarytoallowforcross-channeldetectionandtoenablefirmstochecktransactionsagainstarangeofwatch-lists, while enabling feedback mechanisms.

Firms need to keep a large number of watch-lists updated constantly so that they can screen customers and transactions in a systematic and automated fashion. Necessary watch-lists include sanctions lists of prohibited entities, such as countries currently under UN sanctions, or individuals, such as terrorists, as well as lists of Politically Exposed Persons (PEPs). Firms are obliged to enforce watch-lists, and will face regulatory consequencesiftheyviolatethem.OfficialinternationalandnationallistsincludetheUS’sOfficeofForeignAssetsControl,theBankofEngland,andCanada’sOfficeoftheSuperintendentofFinancialInstitutions.Firmsare not necessarily prohibited from trading with PEPs, but need to carry out enhanced due diligence on these individuals.

Thekeyrequirementsforwatch-listfilteringarekeepingtheselistsup-to-dateandensuringlowfalsepositiveand false negative rates. The former is a data management issue. Firms need to take regulatory feeds and feeds from external databases and to update lists in real time. They also need to screen new and existing customers to ensure their compliance programs are up-to-date.

Filtering requires a mix of analytics. Customers and transactions need to be screened against a set of data, including names, location, date of birth, and other relevant information. This can be done either in real-time or in batch processes, but, facing a higher number of transactions and under greater regulatory pressure, many firmsareseekingtoupgradetoreal-timescreening.Forbothfinancialandnon-financialinstitutions,real-timeand automated screening will reduce the burden on compliance teams, allowing them to do more with less.

Another key challenge for screening solutions is to deal with the number of different spellings and alphabets of names/locations etc. attached to customers and entities. These factors can lead either to over-cautious systems or can lead to a high false positive rate or systems that only screen for direct matches having a high false negative rate. To deal with this, leading technology solutions are using advanced transliteration programs for data originally entered in a different alphabet to the one used by the bank so that all possible spellings are provided. Risk-scoringanalyticswillalsohelpfirmstoprioritizecasesandreducethenumberoffalsepositives.

Leading solutions are also offering fuzzy matching techniques to screen for similarly spelled names and reduce falsenegativerates.Theabilitytohandleunstructureddataalsoallowsfirmstobuilduparicherprofiletoscreenagainst.Toreducefalsepositiverates,firmscanusemanualupdatestocreate“whitelists”oftrustedcustomers,ormachinelearningandartificialintelligencecapabilities.Usingfeedbackmechanismstoupdatesystems automatically reduces false positive rates and reduces the number of investigations that compliance teamsneedtocarryout,allowingfirmstoimprovesecurity,thecustomerexperience,andefficiency.

Improvedefficiencycanalsobeachievedbyintegratingwithothersystems,suchascustomerintelligencesystems,andimprovingworkflowandalertsystems.IntegratingfinancialcrimesystemswithCRMsystemscan allow compliance professionals to access information that will build up a clearer picture and may prevent a falsepositive.Intelligentworkflowandalertscanbelinkedtorisk-scoring,helpinguserstoprioritizethemostimportant and riskiest cases, reducing false positives and the workload of compliance teams.

Atthesametime,theneedforintegrationshouldnotnecessarilybouncefirmsintopurchasingpurported“end-to-end”financialcrimeriskmanagementsystems.Whileone-stop-shopvendorscanofferadvantagesinprovidingjoined-upfinancialcrimemanagement,best-of-breedvendorswillprovidedeeperfunctionalitiestoaddressspecificbusinessneeds.Thechoiceisbetweenbreadthanddepthofcoverageandfirmswillneedtoimplement systems which meet their needs.

Afocusedapproachmayworkbetterifafirm’smanualapproachisbecominginefficientorifitisstrugglingtomeet regulatory requirements. Firms that need to improve their whole systems may want to implement end-to-endsystems;thosethathavespecificrequirementsforfaster,highervolumefilteringshouldlookatthebest-of-breed vendors that have the deep functionality required to meet current market and regulatory requirements.


3- Leading practices from FircoSoftFircoSoftisavendorofwatch-listfilteringsolutionsthatwasfoundedin1990.Thefirmworkscloselywithitscustomerstokeepaheadofregulatorychangesandeliminatetheriskoffinesandreputationalexposure.Morethan600customers,includinganumberofmajorfinancialinstitutions,useFircoSoftsolutionstofiltercustomers and transactions against sanctions and watch-lists to ensure compliance and meet KYC requirements. FircoSofthasofficesinNewYork,Tampa,SãoPaulo,London,Luxembourg,Paris,Zürich,Chennai,Singapore,and Melbourne. Together with its global partner network, FircoSoft provides services, support, and expertise to 2000 customer sites in over 70 countries.

3.1 Technology capabilities

FircoSoftprovidesatransaction-centeredwatch-listfilteringsolution,FircoContinuity,aKYCandEDD-centeredfilteringsolution,FircoTrust,andFircoDueDiligence,whichprovidesapre-packagedKYCandEDDsolution for smaller organizations. It also provides Firco List Service, which offers subscription-based access to sanction lists and other content that optimize the usage of the solution. These solutions form an integrated watch-listfilteringsolution,basedonFircoSoft’spowerfulfilteringengine.Theproductscanfilteragainstmultiple lists: any sanction list (such as EU, OFAC, HMT, and UN), as well as third-party lists and internal watch-lists. Firco List Service ensures that the required lists are delivered to customers and are kept up to date.

AsFircoSoftisdedicatedpurelytoscreeningandfiltering,ithasinvestedheavilyindevelopingfunctionalitiestomeettherequirementsoffirmswithhighdatavolumesandtheneedforhighperformance.FircoSoftprovidesdedicatedlistmaintenance,sophisticatedfiltering,scalability,andaworkflowdesignedtoimprovethespeedandefficiencyofscreeninganddecision-making.ItstechnologycapabilitiesledtoChartis’sdecisiontorankitas a Best-of-Breed vendor in the Chartis Anti-Money Laundering Solutions 2013 report. In particular, Chartis highlightedFircoSoftasabest-of-breedvendorforwatch-listfiltering.

At the same time, FircoSoft solutions can be fully integrated with banking applications through a series of standardconnectorstoreceivetransactiondataandcustomerdata.ThefilteracceptsanytextformatsbuthandlesSWIFT,FEDWIRE,CHIPS,SIC,ACH,andXMLasnativeformat.Thefilterwillprocessthosefieldsspecifically,forinstancesomefieldscanbeexcludedfromthescantoreducethefalsepositivehitrate.Thisdataisthencomparedtowatch-listsandrulesloadedontothesystemandfedintothefilteringengine.Figure1,below, illustrates the solution framework and how alerts are generated.

Figure 1: FircoSoft filtering framework


TheFircoSoftfilteringengineisnotbasedondefinedbusinessrules,asitusesembeddedfuzzylogicmatching.Therearealso33algorithmsbuiltintotheengine,whichcanbeturnedonorofftoinfluencethebehaviorofthefilter.However,businessrulesareusedtoapplythebusinesslogicautomaticallyandthesolutionincludesarules editor that allows users to create business rules and set parameters based on their business requirements. Thisallowsthemtoreducefalsepositivesandtooptimizethefilteringprocess.

Thefilteringengineitselfusesitsmixtureofalgorithmsandfuzzylogictoprovidereal-timescreening.Theengineusesarisk-basedapproachthatcanbeconfiguredtothebank’sriskappetite.Theenginecompareswordsfrom each transaction against consolidated lists, using fuzzy logic search on names and geographic information (suchassanctionedcountries)andstringmatchingsearchon,forexample,passportnumbers.Thefilteringengine then retains matches that contain enough relevant information to generate an alert.

Inadditiontofilteringtransactionsagainstwatch-lists,thesolutionalsoautomaticallyblockswiretransfersthathavebeenstrippedofidentifyinginformationtoevadedetection.Thisautomatedapproachpreventsfirmsfromexposing themselves to the risks of amended payments and improves productivity by removing the need for manualidentificationofthoseamendedpayments.Thefilteringenginealsoincludesadvancedtransliterationcapabilities to support organizations that need to carry out screening across different alphabets, including the capabilitytodetectandblockChineseTelegraphicCodes(CTC,CCC)infinancialtransactions.

Theenginehasanumberofimportantfeaturesthatsupportthecurrentrequirementsoffinancialandnon-financialinstitutions.ThedevelopmentofthisenginehasbeensupportedbyFircoSoft’sfocusonfiltering,which has allowed it to concentrate on improving its ability to screen high volumes of data in real time.

Thesolutionishighlyscalableandprovidesreal-timecapabilitiestosupporttheneedsoffirmstofilterahighvolumeoftransactionsinashortamountoftime.Thesolutioniscapableofscreeningfivemilliontransactionsper day and 100 million customer accounts per screening and can determine in milliseconds whether a transaction or customer is high-risk. Once a hit is detected, the transaction is put on hold until a user reviews andinvestigatestodecidetopassorfailit.Thisbest-of-breedcapabilityenablesuserstoquicklyandefficientlycarry out screening.

Moreover,thefilteringengineandsolutionasawholeisflexibleandhighlyconfigurablesothatthesensitivityofthefiltermatchesthefirm’sriskappetite.Usingroutingrules,thesolutioncansendmessagestofiltersconfiguredatdifferentrisklevels,i.e.alowvalue,lowriskACHmessagewouldbesenttoafilterconfiguredforlowrisksettingsandahighvaluetoafilterconfiguredforhighrisk.Thespecificalgorithmscanbeturnedonorofftoconfigurethefilterandthesolutionalsoincludesanofflinemodelingandtestingmode.Thisallowsuserstomanagebusinessrulesandtesttheirfilterstoensurethattheirfalsepositiveandfalsenegativeratesaresufficientlylow.Thetestingenvironmentincludesacentralrepositoryforallthelists,sothattestingisasaccurate as possible.

Usershavetheabilitytoconfiguredifferentfilteringsettingstomatchtheriskpolicyforeachbusinessline,suchasfordifferentfilteringsettingsfordifferentdemographics.Thesolutioncansegregatedatabetweenregionsand business lines so that each transaction is associated with a unique unit by the banking application. A user can belong to several units and user actions are allowed based on user access rights and the status of a message.

Thedecisionworkflowisalsocustomizabletomatchdiversebusinessprocesses.Userscancustomizescreenstoadapttotheirbusinessneedsandindividualpreferences.FircoSoft’sWorkflowAcceleratorassignsalertsdirectly to experts to reduce human errors and mistaken routing and to improve the decision-making process by removingredundantsteps.AsFircoSoftisadedicatedwatch-listfilteringprovider,itknowsthepressuresfirmsareunderintryingtoscreenhighervolumeswithmanualprocesses.FircoSoft’sworkflowsolutionisdesignedtohelpfirmsmovetoamoreautomatedapproachandimprovetheefficiencyofmanualprocesses.

Messagepairing,inwhichseveralmessagesfromthesametransactionarefilteredasawhole,reducesthenumberofdecisionsthatneedtobemadeandimprovesefficiency.Figure2,below,demonstratesFircoSoft’sdashboards,which gives a clear view of the most important alerts in real time. The dashboard functionality streamlines the decision-making process and enables users to address potential issues before they become a problem. The workflowsolutionallowsscreeningspecialiststomakebetteruseoftheirtime,byensuringthattheyreceivetheright alerts and the necessary information, without becoming bogged down by duplication or irrelevant messages.


Figure 2: FircoSoft dashboards


ToreducefalsepositiveratesFircoSoft’ssolutionsprovidebothmanualandautomaticfeedbacksystems.Thefilteringsolutionprovidesfirmswithinformationonwhichtransactions,individualsorruletypesarecreatingthe most false positives and with the tools to suppress them.

Firstofall,firmsareabletocreatewhite-listentries.Exceptionscanbecreatedforentriesthatprovidefalsepositives because of their similarity to known criminals sanctioned individuals, or PEPs, but have no actual connection to suspicious individuals. These can be technical (in order to prevent hits on common strings) or business (trusted customers where the KYC has been completed). Users are also able to write business rules to adjust the hit-rates and reduce false positives.

Additionally, the solution includes decision reapplication processes. This means that the solution can remember the decision taken by the user to let a transaction go through and will therefore not create new alerts for similar transactions from the same customer. This automation reduces false positives and reduces the workload of the compliance team.

3.2 Organizational capabilities

FircoSoft’stechnologycapabilitiesarecomplementedbyitsorganizationalstrengthsthatenableittoprovideitssolutionstofirmsworldwide.Inparticular,FircoSofttailorsitsimplementationandsupporttoensurethatfirmsindifferentjurisdictions,indifferentbusinesssectors,andofdifferentsizesareabletouseitssolutionseffectivelyandefficiently.

FircoSoft has adapted its implementation strategy to address the needs of organizations outside of the traditional Tier1banksnormallytargetedbytechnologyvendors.ThestrategyisexemplifiedbyFircoDueDiligence,whichprovidessmallbanksandcorporateswithapre-configuredandpre-packagedKYCandEDDsolution.This means these organizations can purchase and implement the solution at relatively low cost, while complying withregulationsandfilteringnewcustomerseffectively.

More broadly, FircoSoft has built its partner and reseller network globally to give it greater reach so that it can implement and maintain its solutions for clients around the world quickly. As a result, FircoSoft has been able to build,implement,andmaintainitsfilteringsolutionat2000sitesinmorethan70countries,primarilyinEuropeand the Americas, but with a growing number of clients in Asia, the Middle East, and Africa.

FircoSoft’sorganizationalcapabilitiesmeanthatithasbeenabletorecordsteadygrowthinrevenueandprofitability.ThishasallowedFircoSofttore-investinitstechnologysolutions.FiroSoft’sinvestmentinR&Dhas risen by 40% over the last year so that they can expand their technology solutions into new areas and new regions.


3.3 Future direction

FircoSoft has recently invested to develop new functionalities and has also acquired technology and talent from Telovia, a provider of compliance and due diligence solutions. These investments will help FircoSoft to expand itsofferingtoprovidegreaterfinancialcrimemanagementcapabilities.Inparticular,FircoSoftplanstogrowinthe following areas:

FircoFATCA–FircoSoft’sFATCAsolution,tolaunchthisyear,willprovidefirmswiththeabilitytomeetthese new regulatory requirements by performing a detailed analysis of the existing customer base to check for potential risks and by capturing documentation and carrying out analysis on new customers. The solution will also provide a reporting module to send details of assets and transactions to the US authorities.

FircoIntelligence–ThisisFircoSoft’scybercrimeinvestigationsolution,whichwilllaunchin2014.Thesolution is designed for use by law enforcement agencies and will use internal and external databases. The solution will be able to track cyber-criminals by using correlating facts from numerous investigations and gathering information from various sources.

FircoPanorama–FircoPanoramahasbecomeapartofFircoSoft’sportfolioandwillbelaunchedasanintegrated part of the FircoSoft suite in 2014. Panorama is a specialist case management environment that enables users to investigate and to carry out on-going due diligence. The solution will provide the ability to investigateandvalidateUltimateBeneficialOwners.Thesolutionprovidesasmartworkflowandincludesself-learning capabilities, so that previous decisions inform decision making. The acquisition of technology and talent from Telovia provides FircoSoft with deep domain expertise and best-of-breed technology in this area.


4- Case studiesCase study 1 – Brown Brothers Harriman – 2010

Brown Brothers Harriman, an American investment bank, was an existing FircoSoft customer who contacted the company because it needed additional technological capabilities to meet increasing regulatory requirements. Specifically,itsAMLCompliancedepartmentneededimprovedfunctionalitytocomplywiththeFinancialCrimesEnforcementNetwork(FinCEN)agency’srequestsforinformation.

Brown Brothers Harriman receives a 314(a) request for information from FinCEN every two weeks that requires thefirmtosearchforpossibledatamatchesintheircustomeraccountrecordsfortheprecedingandcurrent12monthperiodandintransactionsconductedinthelastsixmonths.Ifanymatchesarefoundbetweenthefirm’srecords and what FinCEN is searching for, the results need to be returned in 14 days.

Previously,thefirmhadusedspreadsheetstomanagetheprocess.Businesslistsandthe314(a)listweredownloadedformanualconfigurationbeforefiltering.Althoughthisprocessworkedinitially,itwasfragmentaryand lacked consistency, creating operational and regulatory risk. It also relied too heavily on manual input, makingtheprocessinefficientandtime-consuming.

ThefirmdecidedtoimplementFircoFilteringSuiteinordertosolvetheseissues.ThefirmselectedFircoSoft’ssolutionprimarilybecauseofitsabilitytoautomatethisprocess.TheflexibilityofFircoSoft’slistmanagementallowed the solution to import, update, correct, and enrich the 314(a) list as it came in and to compare it against thefirm’sdata.Everytwoweeks,BBHscans60milliontransactionsand1.5millionaccountrecordsinlessthan 4 hours, extracting the data from their in-house brokerage application. The results are then converted into a report that can be sent to regulators. The solution has reduced the time and resources required for the process, while maintaining the quality of the process.

Case study 2 – West LB – 2010

WestLB (now Portigon Financial Services), a European bank, needed to improve its technology systems to comply with the new requirements surrounding the introduction of the Single European Payments Area (SEPA). SEPA will require all electronic payments to be counted as domestic transactions and European banks will need technology to support SEPA payments in place by 2014.

WestLB’sexistingfilteringsolutionwasunabletodetectthenewSEPAformats,whichmeantthatitcouldnotscreen them, and was also struggling to cope with higher volumes of data. The bank needed a scalable solution that could meet compliance requirements.

ThebankselectedFircoContinuitytofilteritsSWIFTmessagesandSEPAtransactionsinoneenvironment.SWIFTtransactionscouldbefilteredagainstofficialsanctionslistsincludingOFAC,EU,UN,BundesanzeigerVerlag,DFATandOSFI.ThefilteringofSEPAtransactionswasenabledbytheintroductionofFircoUniqueFormat,whichallowsFircoContinuitytoscreennewformattypes.Thesolutionwasalsoconfiguredtobeabletofiltermorethan2milliontransactionsamonthbycentralizingmultiplefilters.Aweb-baseduserinterfaceenablescompliancestafffromaroundtheworldtomanagealertsflexibly.


Case study 3 – Large consumer goods multi-national – 2012

Alarge,multi-nationalconsumergoodsfirmimplementedtheFircoTrustsolutionforitscustomerandvendorscreening needs and the Firco List Service (FLS) to manage and validate its selection of watch-lists. The firmdidthisinordertomeetcompliancerequirements.Previously,itsapproachtofilteringhadbeenlargelymanual,makingittime-consumingandnotuser-friendly.Compliancestafffounditdifficulttocarryoutfilteringprocesses effectively.

Thefirmthereforedecidedtoimplementafilteringsolutionanddrewupasetofcriteriaforselectingasolution.The requirements included:

• The ability to support a variety of data feeds• The ability to support any watch-list• The ability to avoid duplication• Flexibility when reviewing hits• International, multiple language capabilities• Vessel number screening• Integration capabilities

ThefirmbelievedthatFircoSoft’ssolutionsmettheserequirementsandthattheyrepresenteda‘best-of-breed’systemcapableofcarryingouttherequiredfilteringtasks.


5- Final thoughtsAftermanyyearsoflight-touchsupervision,theregulatorypendulumhasswungfirmlybackintheotherdirection over the past few years. The trend for stricter regulation and supervision is not going away any time soon, and neither will the increasing volume of transactions, nor the trend towards digital banking and transfers. Firms,bothinandoutsidethefinancialsector,needtoadapttothisnewenvironment.

Thesetrendshavemadeitnecessaryforfirmstoimprovetheirfinancialcrimeprocessesandsystems.Althoughmany organizations have reacted to the demands of regulators, a great deal still needs to be done to meet the businessrequirements,aswellascompliance.Inparticular,organizationsneedtoimprovetheefficiencyoftheseprocessesinordertoallowfinancialcrimemanagementprofessionalstospendmoretimeoninvestigations,rather than manual screening.

Improvedtechnologysystemswillthereforebeakeyenablerfromimprovedfinancialcrimemanagement.Whilefirmsfacesignificantchallenges,therearetechnologysolutionsthatcanreducecomplianceburdensandimprovetheirmanagementoffinancialcrime,particularlyintheareaofwatch-listscreening.Increasedautomationandthereductionoffalsepositiveswillallowfirmstoimproveproductivity,improvethecustomerexperience, and do more to prevent genuinely suspicious transactions.

Inchoosingfinancialcrimetechnologysolutions,firmswillneedtoexaminetheirneedsbeforejudgingvendors.Differentfirmshavedifferentchallengesandshouldfocustheirspendingaccordingly.Best-of-breedtechnologyvendorsmaybemoreappropriateforfirmslookingtoimprovetheirscreeningprocesses.Thesevendors,suchasFircoSoft,willhavemoresophisticatedfilteringengines,greaterdedicationtokeepinglistsup-to-date,andhigher performance.

Equally,currenttechnologiesalsoofferfirmstheopportunityforjoined-upfinancialcrimemanagement,anopportunitythatshouldnotbeneglected.Placingfilteringsolutionsinawiderfinancialcrimemanagementsystemwillhelpfirmstotackleothercompliancerequirementsandpreventothertypesoffinancialcrime,reducinglosses.Iffirmsdoimplementbest-of-breedsolutions,theyshouldensurethatthesesolutionshavetheintegrationcapabilitiestolinkthemintofirms’broaderfinancialcrimemanagementtechnologyarchitectures.

Best-of-breedcapabilities,integratedintoajoined-upfinancialcrimearchitecture,willallowfirmstoimprovescreeningprocessesandresultsandtousesophisticatedfilteringtechnologiestoprovidebetterinformationtootherfinancialcrimesystems.Firmsshouldnotseeimprovingfinancialcrimemanagementsolelyasaregulatory requirement, but as the opportunity to achieve business goals by cutting losses from crime. Chartis believesthatfirmsthatimplementinnovativetechnologysolutionswillbewell-placedtodealwithcompliancerequirementsandgaincompetitiveadvantagethroughgreaterproductivityandreducedexposuretofinancialcrime.


6- Further reading• Anti-Money Laundering Solutions 2013• Enterprise Fraud Management Solutions for Financial Services 2013• Operational Risk Management Systems for Financial Services 2013• Enterprise GRC Solutions 2012• Collaborative Risk Management• Basel 3 Technology Solutions 2012: Horses for Courses• Global Risk IT Expenditure 2011• RiskTech100® 2012

For all of these reports see: www.chartis-research.com

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