In South-East Asia it’s a well-known puzzle that you often find a series of stalls along the road selling the same produce.
When tourists ask why it is that these traders all choose to sell the same thing, the answer comes back: ‘Because if someone is running a business selling starfruit then there’s clearly a market for it so they all sell starfruit.’
It’s a deliciously circular argument.
But we’re a contrarian bunch at Napier so recently at the ACAMS anti-money laundering conference we weren’t selling starfruit.
No we were selling our own fruit and it’s name was AAR or Account Activity Review.
We sailed down to the QEII Centre near the Houses of Parliament to whet the appetites of a group of people who are largely used to being sold the same thing. Plenty of AML firms like us produce systems that look for anomalies in vast amounts of transaction data.
Of course we do it better than them but the real reason we were there was to sample opinion on a lesser-known area of regulation that no one has set out a stall for before.
"This is where it gets slightly complicated. Regulations require all financial firms, including boutique and major banks and insurance firms, to monitor transactions for suspicious activity on an ongoing basis."
Julian Dixon, CEO
However, a separate regulation also requires that banks risk assess their customers individually from time-to-time and this happens as a completely separate process. Customers’ identities, associations and transaction behaviours must all be analysed. The frequency with which this has to happen is determined by the level of risk they are thought to represent.
These account reviews are known as AAR to some, but it’s telling that there is not even a standard industry term for these reviews at present.
This where the AML market is polarised. Most banks and financial firms still do these reviews in a very manual, time consuming and labour intensive way.
By close of innings we had quizzed 70 AML professionals desperate to enter our Champagne raffle at the 13th Annual ACAMS AML & Financial Crime Conference.
The vast majority were actually surprised to discover we were already putting to market an AAR product that would finally automate this burden.
They spoke to us about the weight of the manual processes on their resources and the huge costs involved. We learned smaller firms were still even using spreadsheets to analyse and keep track of data.
Between 40% and 50% of the people we spoke to needed a solution like this and a couple of people were even genuinely animated about it… though I confess one of them was our very own Luca Primerano.
Trust me when I say that if you want someone to get passionate about Big Data and machine learning, its Luca. He’s passionate about virtually everything.
But it’s money (and savings) that hold the balance of power in the end. We calculated recently that this AAR requirement has been responsible or £4bn of bank fines since 2000 because firms haven’t had the tools they need to meet it head on.
Today it remains a costly burden for financial firms... and an opportunity for those of us who don’t just want to sell starfruit.