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An article relating to this blog post on Finextra:

BIS consults on AML role for intermediary banks

The Bank for International Settlement (BIS) has issued a consultative document seeking feedback on ways to address a current weakness in global anti-money laundering (AML) efforts - the lack of transp...


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US, UK, EU Target Global Payments

The news that "the Bank for International Settlement (BIS) has issued a consultative document seeking feedback on ways to address... ...the lack of transparency in payment messages used for cross-border cover payments." cannot come as a surprise to anyone involved in the implementation of AML systems.

This inherent weakness has long been the bugbear of the regulatory authorities, particularly the US Treasury, which realises that a bulk of SWIFT payments, i.e. those denominated in US dollars, is constantly passing through the US banking system.

You would think that big brother thought this a good thing, and it might have been, if it were not for the unfortunate frustration that there is no way of gathering the information about the end customers.  This is because this information is only included in the underlying "end-to-end" SWIFT message, be it a payment message for 1,500 USD from Mr John Smith to the Hezbollah or a USD reimbursement under a documentary credit to import enriched uranium.

What happens in these cases is that the end-to-end message goes nowhere near the US banking system.  All a US bank would see is a bank-to-bank message from Mr Smith's account with the perfectly legtimate (but fictional) State Bank of Lisbon to their US correspondent asking them to pass 1,500 USD to the equally imaginary People's Bank of Larnaca.  As neither of these banks are on any flagged lists, the payment will go through without allowing Uncle Sam to get hold of these funds.

Adding the details of the corporate bodies or individuals who are the end parties to all the cover messages (as planned by SWIFT for November 2009) will be a step in the right direction of closing off many of the existing avenues for money laundering and illicit transfers.

The authorities will then need to turn their attention towards the less heavily regulated paths, such as peer-to-peer lending sites and web-based money transfer platforms, not to mention m-payments, as reported earlier this year.

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A community for discussion of Transaction Fraud systems and anlaytical techniques for bank card and financial services organisations.


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