Recent Discussions
Advancing Correspondent Banking Insights: Identification of non-customer entities
In the world of correspondent banking, a significant challenge lies in unravelling the intricate web of relationships and managing onboarding processes for respondent banks. The importance of these elements becomes clear when considering the bigger picture. Equally essential within the scope of correspondent banking's anti-money laundering measures is the identification of the non-customer entity also known as customer’s customer that appears in the transactions. Delving into the finer details and examining the customer’s customer enables us to uncover smaller risk components and gain a deeper insight into the transactional data. Identifying and evaluating the risks associated with individual customers, businesses, and payment service providers within this ecosystem lays the foundation for a more robust and reliable risk model. While a broad perspective is crucial, zooming in on the risks faced by institutions is even more vital, particularly in the context of correspondent banking's AML efforts. This is where Quantexa steps in as a comprehensive solution provider, addressing all three inherent risks: monitoring complete transaction paths, respondent banks and affiliates, and effectively supporting customer’s customer identification issues. Elevating entities identification with Quantexa: A Comprehensive Overview This article sheds light on how Quantexa's innovative approach enhances the process of identification of non-customer entities. This process stands as one of the most demanding, involving the identification of individuals or businesses within transactions. Yet, it is easy to miss pertinent risks due to mismatches with watchlist hits or other risk indicators. How can we overcome these challenges? How can we support the identification process in correspondent banking, where internal customer data is not enough? The answer lies in providing context, linking data, and enriching datasets with external information. Through the power of entity resolution and network generation, Quantexa seamlessly integrates external data and assigns scores to it. This not only simplifies the identification of the Customer's Customer but also helps assess risk by aligning individuals or businesses with watchlists and other risk factors. Remarkably, this process is entirely automated, with Quantexa presenting meticulously resolved data to investigators. The incorporation of networks enhances the visual representation of data, speeding up investigations and reducing the potential for errors. The network above illustrates an alert in Correspondent Banking solution Quantexa created a contextual view around the non-customer entities based solely on external data, linking them to Corporate Registries and watchlists among other data sources and creating links between transacting parties. Quantexa's versatile infrastructure enables the ingestion of various datasets. Entities are created and transformed into a fortified investigative resource, enriched with additional variables such as transactional jurisdictions, historical case outcomes, counterparties, commercial registries, watchlists, and more. By contextualizing entities and individuals beyond the bank's direct clientele, Quantexa assists in effectively managing risks and ensuring compliance with regulatory mandates. Key Aspects of Quantexa's Customer’s Customer enrichment in Correspondent Banking Entity Resolution in Correspondent Banking Entity resolution takes centre stage, involving data cleansing, normalization, and the application of advanced machine learning and AI models to establish reliable entity identification methods. This process groups records related to each entity, compiles a comprehensive set of attributes, and creates labelled links between entities and source records. By joining data from diverse sources, including external commercial registries, internal records, and watchlists, Quantexa constructs a comprehensive view of natural persons and business entities, primed for thorough investigation. Network Generation in Correspondent Banking Network generation involves connecting entities through transactions and other data-driven relationships. These connections encompass individuals, shared addresses, phone numbers, email addresses, corporate structures, watchlists, and AML cases. Networks are crafted using both internal and external data sources, with a focus on relevance to AML detection and investigation. Quantexa's approach mirrors industry best practices, with the platform's network generation templates adaptable in collaboration with bank data scientists and investigators. This ensures alignment with the prevailing risks in the bank's customer and customer's customer landscape. A Fresh Perspective on Customer’s Customer Risk with Quantexa Quantexa's integration of entity resolution and network generation offers an entirely new outlook on Customer’s Customer risks, streamlining their mitigation. To understand more about how Quantexa works in Correspondent Banking AML, reach out to us and schedule a demo. Share with us what is the biggest struggle for your Institution when it comes to non-customer entities identification?
A Tale of Two Investigations: Transforming Financial Crime Risk Monitoring and Investigations
The adoption of technologies to enhance financial crime risk monitoring has become ubiquitous within the banking sector. These technologies span a spectrum, ranging from the automation of fairly binary controls to the deployment of black-box Artificial Intelligence (AI) models. Regulators are increasingly advocating for organizations to embrace technological advancements in their fight against financial crime, as exemplified by: FCA, MAS, HKMA all have RegTech support initiatives with digital sandboxes to promote solutions to complex regulatory challenges; MAS provides RegTech grants for Singapore based FIs looking to enhance their risk management and compliance functions with the use of technological solutions; HKMA’s recent AML Regtech: Network Analytics report promotes the adoption of network analytics capability to strengthen the response of banks’ anti-money laundering (AML) systems to deception and other financial crimes. In addition to improving risk identification, many solutions are dedicated to enhancing the actual investigation process by eliminating manual, historically time-consuming and inconsistent steps such as data collation or narrative production for SAR/STR filing. These solutions hold significant appeal as they can streamline resources while maintaining comprehensive risk coverage. The benefits of risk mitigation and operational optimization offered by such tools are widely recognized and discussed. However, what is less frequently discussed is the need to transform the underlying investigative process itself. The most cutting-edge tools may fall short of their full potential if they are not accompanied by process innovations. Transformative technologies demand transformative approaches, that often includes a cultural and mindset shift, as well as a technical one. To illustrate this point, let's examine a financial crime case study through two different investigative lenses and how they can lead to materially different outcomes:
Anti-Money Laundering in Capital Markets: Time to Embrace Innovation
Detecting money laundering risk in capital markets is a challenge which the industry has long struggled to effectively overcome. It is clear that the traditional rule-based transaction monitoring systems are not working and capital market firms need to adopt new technologies and approaches to stamp out money laundering. Read about this complex problem and how Quantexa is helping to solve the issue Anti-Money Laundering in Capital Markets: Time to Embrace Innovation - Quantexa Community IntroductionDetecting money laundering risk in capital markets is a challenge which the industry has long struggled to effectively overcome. Capital markets inherent risk characteristics, such as high volumes of transactions, cross-border activity, direct market access and complex product offerings complicates risk… Or watch our short Fireside Chat session:
The Wild West of Banking
The world as we know it certainly feels as if it’s gotten smaller – from everything from sporting events like the World Cup, to historical events and human relief efforts. Arguably, there is no segment where this is more evident than the world of business and economics. Instead of micro and regional markets, companies big and small can build in one country with the potential to market, sell and ship globally. With the expanded reach to meet business demands, the use of correspondent bank networks and payments has also increased in tandem. What is Correspondent Banking (Corre)? While many people have heard of Corre they may not understand its true meaning. Simply put, correspondent banking is where one financial institution provides services in a particular region to another institution that may not have a physical presence within that area. Some of the services that the correspondent bank (local institution) would provide to the respondent bank (foreign institution) include money transfers, currency exchanges, trade finance and other business transactions. Included in the Corre framework is the concept of intermediary banks. These institutions play an important role by acting as a connector between one institution and another that may not interact directly. How this might work in real world terms: a retail store in Ireland may wish to send money through their Irish- based institution to a manufacturer’s account located in China. Whilst the retailer may not realize what takes place behind the scenes, the Irish institution may need to send the funds through an institution in England, which in turn may need to send the funds through an institution in Japan before finally landing in the manufacturer’s account in China. The institutions in England and Japan are intermediary banks that are facilitating the completion of the payment. Three Areas of Increasing Risk For financial institutions that want to provide these services, there are considerable benefits derived from conducting cross-border payments - there is also a lot of risk. The scrutiny required to monitor for matches of sanctioned entities, attempts to avoid these matches, wire stripping (the deliberate act of removing information making screening more difficult to identify and restrict payments on sanctioned entities), u-turn payments and other suspicious movements of funds has increased exponentially over the past few years. As these risks grow, the role of the Corre relationship is becoming more important in the global banking ecosystem. But for those institutions who are interested or eager to stay in the game, they must be willing to invest in more efficient regulatory risk controls in their correspondent banking operations. These investments will allow institutions to leverage more of the data that is available while still generating fewer false positive alerts, increasing the volume of enriched, productive alerts and automating operational processes that will allow their end users to make more intelligent decisions faster. The most challenging risks and top priorities for institutions are the multitude of ways people attempt to circumvent global sanctions regulations. With each new rule or algorithm to match identifying information to the names on sanctions lists, there seems to be no limit to the creativity applied to avoid these same methods. Each Institution is also limited to the information provided by other institutions, directly or indirectly. This information is critical to identify the entities more accurately in the payment string. Was there an address, date of birth, or other identifiable information included? Each of these data points are key to reducing the number of false matches. Adding to the complexities are legal entities that could have multi-layered hierarchies with sanctioned entities as partial or hidden owners or controllers. Not to mention that the sanctions lists are updated seemingly daily, requiring institutions to update whom they monitor frequently. The effort to stay on top of their monitoring efforts is daunting. How can institutions keep pace and ensure that no sanctioned transactions are slipping through? The potential regulatory and reputational damage is a constant threat. One only needs to look at the headlines to see what could happen to an institution. An insightful break down and summary of recent AML fines by regulators can be found here. Sanctioned entities aren’t the only concern for institutions when it comes to Corre. Institutions also need to keep a keen eye on their own banking peers as well. Before entering into a correspondent banking agreement, institutions are required to review and ensure their partner bank has a robust AML program with the proper controls and procedures in place. While this facilitates a business agreement, each institution must ensure the partner institution is delivering on their promises by monitoring the other’s activity at an aggregate level as well – which could mean monitoring millions more transactions daily. Even if the institution is acting as an intermediary bank, meaning that neither the sender nor receiver is their direct customer, they must still monitor activities to ensure no restricted party is passing money through their institution. In other words, the institutions are not only concerned with their customers, but also non-customers that may move money through them. Overwhelming to say the least. The Transformation of Corre Monitoring Given these distinct challenges, institutions must deploy solutions that provide comprehensive insights to their risk exposure. Quantexa is positioned in a unique way to help overcome these problems through data convergence, entity resolution and risk awareness. The Quantexa platform stitches together internal data that includes transactions, accounts and entities from both current and historical data sets, along with external enrichment data, such as corporate registrations, news feeds and watchlists. Being able to combine this data has historically been a pain point for institutions as it means putting the data into specific schemas or formats for it to be useful. Because Quantexa requires no pre-defined tables and can seamlessly integrate data sources into the platform, the data challenge has been significantly reduced. Once this data is joined, entity resolution begins by connecting disparate data into meaningful results. Different customers, non-customers and counter party profiles are connected to build a more holistic view of the profile and the exposure the institution has to that entity. Quantexa automates this process and eliminates the need for manual overhead in searching for and combining records. From an operations perspective, this means that instead of looking at an individual transaction, an institution can combine information embedded in historical transactions with different third-party data. They can even use KYC documentation to more effectively determine if an entity within that transaction is a true match to a sanctioned entity. With Quantexa Contextual Monitoring providing an enriched, holistic view of parties, counterparties, non-customers and potential related risk, institutions can determine if the new transaction is of significant exposure through hidden connections to other high-risk parties. For example, connections can be automatically expanded from (non) customers or counter parties through ownership and directors to find hidden sanctions and PEP/RCA risk. Clear visualizations then indicate that either the (non) customers or counter parties are linked to a sanctioned entity via two or three hops with related connections to shell companies or addresses. This saves immense time for investigators by reducing manual information gathering and creating enriched alerts which ultimately enable them to make accurate risk- based decisions. Conquer the Wild West The ability to combine multiple data sources, automate historically manual processes and reduce the amount of risk faced by institutions in the Corre market can be realized today. Leveraging Quantexa’s capabilities can improve operational overhead and provide institutions with more confidence and security in an area viewed by many as the great frontier of the financial ecosystem ready for expansion, but fraught with risk, not unlike the Wild West of old. Don't miss our short Fireside Chat Session discussing the evolution of transaction monitoring landscape and how contextual monitoring and advanced technologies can help organizations in enhancing their capital markets AML controls.
Uplifting sanctions/export controls and breaking anonymity
A Canadian national and a New York resident pleaded guilty this week to conspiracy to commit export control violations for their roles in a global procurement scheme on behalf of sanctioned Russian companies. Some of the electronic components shipped by the defendants were later found in seized Russian weapons platforms and signals intelligence equipment in Ukraine. According to the court documents, the defendants allegedly conspired to ship more than $7 million in dual-use US electronics to sanctioned Russian companies, shipping the components through front companies in several countries, including Turkey, India, China, and the United Arab Emirate, from where they were subsequently rerouted to Russia. As this and other similar cases highlight, sanctioned parties and organized criminal networks are growing more sophisticated and aligned in their techniques every day. 🔦 Breaking anonymity and overcoming obfuscation remains critical The illicit usage of Shell/Front Companies, transactions and shipments to non-sanctioned countries and entities, the presence of underlying collusion etc. have all made risk management in this space increasingly difficult. This has put an unnecessary burden on frequently separate investigation and analyst teams within financial institutions to gather data and make the connections. However, by bringing together internal and external KYC, AML and Sanctions data, intelligence and processes, Quantexa enables the comprehensive contextual monitoring of customers and counterparties throughout their entire lifecycle. This allows institutions to better identify and manage holisticrisk, inclusive of sanctions and the presence of evasion techniques, including the illicit usage of shell companies, professional enablers and gatekeepers. To see how technology, combined with better data sources and focused typologies have changed the way institutions can break through the anonymity so essential for sanctions risk management, please reach out or take a look at the below. ➡Breaking Anonymity Through AI: Sanctions, Shell Companies and Scandals (webinar on-demand) ➡Navigating Secondary Sanctions Risk: The Heightened Need to Mitigate Indirect Exposure (blog) ➡New FinCEN Advisory: Counter the Financing of Iran-Backed Terrorist Organizations (blog) ➡Navigating Global Sanctions: Technology Solutions for Asia-Pacific Compliance Challenges (blog)All Investigations are created equal…right?
Intelligence-Led Investigations: Simplifying the Chaos There’s an open investigation. We’ll investigate. An investigation is underway. Everyone has heard of these terms before. For some, the terms might transport them to a classic Sherlock Holmes novel, or perhaps a gritty detective show that enthralled them. But for others an investigation is something that is much more real – it’s what they do on a day-to-day basis. Investigations are at the heart of the hard work performed by people in financial crime units across the public and private sector. But what exactly is an investigation? What does the process entail? While an investigation, no matter the industry, can be summed up in a few words; it’s a complex process that involves navigating many red flags, data points and multiple steps. All investigations are the same. Right? Investigations are not as simple and straightforward as gathering the facts (nothing but the facts) to determine what transpired. For many investigation units, the process of completing a thorough investigation is dependent on a number of factors such as: What was the catalyst for initiating the investigation? How many other cases are in the queue that also need attention? How much time is left to complete this case? How much data (i.e., information) was initially provided to start the investigation process? Will the investigator need to go out and gather a lot more information to understand the overall context of what took place? Has any of the data already been triaged by a system? Is it trusted and/or need to be validated as part of the investigation? Are there unknown entities involved or leads to explore? Where is that information held – multiple applications, different lines of business/departments or external to the organization? Does the investigator have the experience and expertise in which to process the raw facts of the investigation into an actionable outcome and decision? In the most basic terms, an investigation needs to answer the who, what, where, when and why questions. Depending on the type of investigation, this might involve collecting different artifacts such as individual / business activities, forensics, financials, legal documents, open-source records, communication records, copies of videos and more to support any investigation. These are critical in defending a determination when a case is escalated or closed, as each investigator needs to document the steps and reasoning behind an action or decision. Context brings all these together and plays a critical role in any investigation to help identify criminal, terrorist and fraudulent activities. A lack thereof will hinder an investigator’s ability to make a sound decision on the outcome of the case. Leading potentially to an incomplete understanding of the entirety of what took place and whether that activity is indicative of criminal actions. Finally, how an investigation is completed can vary and largely depends on the factors listed above. As such, investigation units should have procedures to assure that operational processes are adhered to. Often these processes are simply called “workflows” and can be manual, automated or in most situations, a combination of both. Regardless of the process, there are a few similarities that need to be applied to most investigations to be as efficient and effective as possible. A complex example Imagine, as a practical example, a financial crime investigator is tasked with looking at a few transactions taking place from accounts held by entities in different regions, several hundred miles away from each other. There are cash transactions coming into the accounts of one entity through bank branches in one area but transferred into accounts of the counterparty located in another region within a day of the incoming funds. On the surface, it’s an example of rapid movement of funds. As an investigator you’re trained to follow the movement of money to determine a reason why this activity took place. At first, there are at least two entities involved to begin the investigation, but as the money is traced from one entity to another, the list of entities that needs to be reviewed as part of the transaction string grows. And not just the entities receiving or sending money, but the owners and signers of the accounts that are reviewed as well. There are several questions that an investigator will need to consider and answer to determine if this activity is suspicious or not. Are the individual transactions in low amounts, but aggregate to large amounts? Are the transactions being conducted by the same people? At the same locations? Do the businesses appear to be conducting activity that is consistent with their industry? Do any of these businesses appear to be shell companies? Where are these businesses registered and who are the owners? Do the owners receive the benefit of the funds, or use the funds for personal gain? Are the owners on any internal or external watchlists? How do I know that this person associated with one business is the same as other businesses – or named in multiple different documents? The investigation process must comprehensively answer: Who is involved? What are the businesses and the activities for? Where are these entities located and the activity occurring? Why is this taking place? How did the activity occur? Which oftentimes results in the investigation becoming much more labor intensive and complex from gathering data that could take up to 80% of an investigators time. How can the paradigm be shifted? Although at times this process may seem daunting, advanced capabilities, such as those that underpin the Quantexa Intelligence-Led Investigation’s platform, exists to help investigators automate the collection of different internal and external data points, build connections via relationships, social and financial interactions, determine common points of interest and compile these into an easy-to-understand, meaningful outcome. For traditional systems, these continue to be labor intensive steps, where investigators usually spend hours, if not days, leveraging multiple systems, looking through data sources, loading data into spreadsheets and uncovering new leads to review, before analyzing the findings. In turn, by automating these steps and creating a frame of reference investigators can spend more time focusing on analyzing the information that coincides with their intuition for a more confident decision. An important first step is to ensure that there is a holistic view of each relevant party involved through Entity Resolution. This involves building a unified view of profiles and accounts to ensure that James, Jim, Jimmy, Jamie and Jay are all the same person associated by a phone number, or address, or who owns or is connected to a business. This is something that can be done not only for subjects of interest for an organization, but also for external parties as well. Doing so can also define and identify personas such as victims, perpetrators, and accomplices. By taking this important step, investigators gain a clearer picture of the parties involved as well as their relationships without the need to manually pull it all together. Once this step takes place, financials, forensics, communications records, timelines, corporate hierarchies, geolocation mapping and/or other external data sources can be overlaid into the entity structure. By including these data elements, a network build can be generated to show hidden relationships between seemingly unconnected entities and key events. The outcome of these steps provides investigators with an enriched view into the true number of parties to be included in the investigation, how they are related and the activities taking place between them. Quantexa’s Intelligence-led Investigations automates these steps and has been proven multiple times to reduce the overall investigation time by up to 60%. We eliminate manual process so that more time is dedicated to analyzing and assessing critical data points, flipping the paradigm to 80% of their time assessing and only 20% gathering data. With many investigation case queues in the double digits, providing automated insights will generate context for holistic decision making and ease time management constraints. Summary Whether a complex or straightforward investigation, innovative tools exist to help automate and streamline the manual steps many investigators face per case. Quantexa provides comprehensive views of entity profiles, their relationships to other parties and the patterns of activity that take place between those parties. By taking a transformative approach that involves enriching our understanding of activities, such as the breadth and complexities with subjects of interest, movement of money, and uncovering relationships and activities, we create the context needed to drive investigators to automate their efforts while at the same time, make more informed, intelligent decisions.
Don't miss our new 'A day in the life of... an Investigator' series 🔎
Did you know we've recently added a new section for investigators to our A day in the life… series? Check out the series (login required) to read about a typical day of some of the best investigators using Quantexa, as well as some of their top investigation success stories. Interested in contributing your story? Let us know at community@quantexa.comDecision Intelligence is the Key To Stopping Modern Slavery And Human Trafficking
Human trafficking and modern slavery violations are happening across the world. Find out more about what financial institutions need to know about anti-slavery operations Human trafficking and slavery have reached epic proportions worldwide fuelled by wars, economic crises, climate change, political unrest, and demographic pressures in countries of origin. Criminal networks have also become far more sophisticated and tech-savvy in their abilities to communicate and collaborate with other criminal networks, diversify smuggling routes, and evade detection as illicit profits from the human trafficking trade skyrocket. The recent tragedy off the coast of Greece in which more than 600 migrants lost their lives is yet another heartbreaking example of how migrants themselves are being forced to take higher risks in their attempts to seek safer places to live. Read our full blog which will outline: What financial institutions need to know about anti-slavery operations Uncovering criminal activity with AI-enabled technologys. A network example of exploitation within construction Decision Intelligence is the Key To Stopping Modern Slavery And Human Trafficking Human trafficking and modern slavery continue to surge globally, with sophisticated criminal networks exploiting digital tools and financial institutions. See how AI-driven Decision Intelligence can offer vital insights to detect and disrupt these operations. Recognising the sensitivity, share with us your thoughts and experiences of tackling this challenge?How Contextual Monitoring is a game changer for Correspondent Banking AML
Join and for a short Fireside Chat session to learn more about Correspondent Banking and how next generation monitoring can help: Overarching topic: What can institutions do to improve their AML monitoring capabilities in the Correspondent Banking space. Can leveraging Entity Resolution and data enrichment reduce alert volumes and improve effectiveness in monitoring operations? You can also read more in our 'The Wild West of Banking' blog!FCA Dear CEO letter for wealth management and stockbroking firms - Are you doing enough?
The UK Financial Conduct Authority has published a ‘Dear CEO’ letter this week to wealth management and stockbroking firms. The letter highlights two areas of concern, prevention of financial crime and implementation of the Consumer Duty. Specifically related to Financial Crime, it notes that the FCA expects firms to: not knowingly or otherwise engage or facilitate frauds, scams, or money laundering understand financial crime risks by identifying who the clients are, including their expected transaction patterns and corporate structure not carry out tick box compliance exercises or outsource responsibility to third parties ensure there are robust and effective systems and controls to counter financial crime and money laundering in a proportionate and risk-based way ensure SMF 16/17 holders have the required experience, skills, and independence share and report information about wrongdoing to the FCA or relevant law enforcement agencies immediately read and fully implement the Financial Crime Guide: A firm’s guide to countering financial crime risks (FCG) and Financial Crime Thematic Reviews (FCTR), which outline the steps firms must take to defend against financial crime. The letter concludes by advising that the FCA’s supervision will become more targeted, intrusive and assertive. For example, its new, dedicated financial crime function for consumer investments will focus solely on identifying firms with key fraud, scams or money laundering indicators. The FCA will also increase engagement with firms on non-financial misconduct, with anecdotal evidence supported by recent cases reported to the FCA and public negative press articles. The FCA highlights that it has already started a major drive with short notice and unannounced visits, particularly for financial crime, and it is increasing the use of its supervisory tools and powers. It plans to use the Consumer Duty to intervene quickly against potential or actual consumers harms, on an individual or multi firm level. At Quantexa, we are utilising multiple award winning Contextual Decision Intelligence to help global financial institutions comprehensively move beyond “tick-box’ compliance and transform their AML/CFT risk decisioning. For more information, or if you would like to discuss the underlying regulatory tone, please reach out.
