AMLReport

ANTI-MONEY LAUNDERING

CEB TOWERGROUP

COMMERCIALBANKING AND PAYMENTS PRACTICE

Technology Analysis Abstract*

Andy Schmidt Research Director, Commercial Banking and Payments

Vendor Assessment Team

*For full copies please contact Peter Johnson at CEB TowerGroup

2

COMMERCIAL BANKING PRACTICE

Executive Director

Aaron Kissel

Practice Manager

Joanne Pollitt

Research Director

Andy Schmidt

VENDOR ASSESSMENT TEAM

Managing Director

Jaime Roca

Project Manager

Magda Rolfes

Research Analyst

Phung Phan

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LEGAL CAVEAT

CEB TowerGroup has worked to ensure the accuracy of the information

it provides to its members. This report relies upon data obtained from

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made by CEB TowerGroup.

© 2012 The Corporate Executive Board

Company. All Rights Reserved.

CEB TOWERGROUP COMMERCIAL BANKING

AND PAYMENTS PRACTICE

3

EXECUTIVE SUMMARY

TECHNOLOGY ANALYSIS SCOPE & METHODOLOGY

In response to feedback from our membership, CEB TowerGroup developed this technology analysis product to identify key components of a technology

investment decision and effectively compare vendor technology products. The basis of our process comes from the knowledge that investment decisions

revolve around the benefit to the end-user and enterprise of a technology rather than the feature set alone.

This technology analysis is tailored to reflect the needs of the end-user to diagnose the technology attributes particular to a firm, and to effectively identify

vendor products that align with the firm’s needs. To that end, CEB TowerGroup conducted a series of interviews and surveys with financial services

executives, industry experts, and vendors regarding branch sales and service technology. The results of this research formed the basis of our anatomy and

informed the proprietary five point rating system on which we scored individual products.

CURRENT MARKET & FUTURE INVESTMENT

Money laundering directly impacts global financial stability. The IMF estimates that the total funds laundered each year globally are equivalent to 5%

of global GDP or $3.5 trillion, which is roughly the size of the German economy. Because money laundering often involves cross-border financial flows, it

can artificially distort international capital flows. This discourages foreign investments and disproportionately impacts developing countries which rely more

heavily on foreign capital to finance their growth.

Money laundering is the top area of focus for compliance executives. In 2012, a series of regulatory actions against major global banks centering

around their anti-money laundering (AML) control lapses dominated the headlines. The eye-watering fines, which range upward of over a billion dollars,

imposed on these institutions served as a warning for the entire global industry. In response, financial executives have placed renewed focus on AML

compliance. In a survey conducted by the European Commission, executives from both large and small institutions rank AML as the number one compliance

function in terms of resource allocation.

Leading financial institutions are developing an enterprise strategy for AML compliance. AML compliance lapses often occur when controls are set and

managed by individual business units or subsidiaries without centralized oversight. This can create a disparate mix of sometimes contradictory approaches.

Leading banks are pursuing an enterprise approach to AML compliance, in which a single strategy is applied and enforced across all business lines and

units. To do this, these banks are investing in scalable and flexible transaction monitoring systems which possess proven capabilities to integrate with a wide

variety of source systems.





4

EXECUTIVE SUMMARY

VENDOR LANDSCAPE AND RANKINGS

Anti-money laundering (AML) systems monitor transactions at financial institutions to detect the patterns indicative of money laundering behavior utilizing a

combination of rules and analytics-based strategies. The selection process for featured technologies centered around those vendors with mature products,

globally recognized innovation, and multiple large-scale installations at major financial services institutions. In particular this report focuses on end-to-end

AML solutions with transaction monitoring, reporting, alerting, and case management capabilities.

This technology analysis profiles and quantitatively ranks end-to-end AML technology solutions from ACI Worldwide, BAE Systems Detica, EastNets, FIS,

Fiserv, Jack Henry, Oracle, NICE Actimize, TCS, Tonbeller, Verafin, and Wolters Kluwer Financial Services. Additionally this report also profiles 2 sanctions

screening solutions from Accuity and Fircosoft and 1 specialty AML system from Experian. These 3 solutions were not scored against the end-to-end systems

because of the more limited scope of their offerings.

By combining our qualitative and quantitative data from interviews with industry experts, financial institutions and vendors, CEB TowerGroup identified 23

attributes that define a “best-in-class” AML system. These attributes are grouped into four categories that highlight a firm’s user and enterprise needs.

Vendor rankings are based on our proprietary five point rating scores on each of the 23 “best-in-class” attributes. The top vendors were designated as

best-in-class performers based on their composite scores in each of the technology categories below.

BEST-IN-CLASS TECHNOLOGY CATEGORIES

Banking executives investing in AML Compliance should use the Diagnostic Anatomy on page 17 to select the vendor that best aligns with their firm’s needs and

business objectives. Vendors are listed in alphabetical order.

DETECTION TOOLS includes those attributes that enable financial institutions to identify and prevent all high risk transactions and behaviors across the

enterprise. Leaders includes 3 vendor products

USER EXPERIENCE includes those attributes that enhance user productivity by improving the breadth and quality of data.

Leaders include Wolters Kluwer Financial Services’s Wiz Sentri, and 2 other vendor products

ENTERPRISE OPERATIONS includes those attributes that support standardized AML compliance across all business lines and delivery channels. Leaders

include Wolters Kluwer Financial Services’s Wiz Sentri, and 3 other vendor products

ENTERPRISE SUPPORT includes those attributes that influence the vendor’s tactical fit and strategic alignment with the enterprise.

Leaders include 4 vendor products

5

Technology Analysis Presentation Roadmap Mission Statement: CEB

TowerGroup technology

analysis process provides a

customer-driven,

transparent, and unbiased

review designed to drive

informed business decisions.

Current Market: Provides a view

of industry and customer changes,

and best practices for technology

investment and implementation.

Future Investment: Forecasts IT

spending and identifies emerging

technologies and innovations.

Vendor Landscape: Provides an

overview of key vendors, product

features, and market position.

Product Rankings: Highlights

best-in-class attributes and shows

a comparative perspective of

leading products.

Current Market

Future Investment

Vendor Landscape

Product Ranking

Market Drivers:

Assess changes in the

industry and customer

behavior

Emerging Technology

Landscape:

Pinpoint emerging

technologies and

innovations

List of Players: Identify

key technology firms

and their products

“Best-in-Class” Products:

See the top products

based on our anatomy

categories

Case Study:

Learn why a global

bank’s inadequate AML

controls led to massive

fines

Diagnostic Anatomy:

Choose your investment

priorities with our

proprietary framework

Ranking Methodology:

Review the key

components of an

investment decision

Feature Audit:

Compare the relative

feature offerings by

vendors

Vendor Profiles:

Understand the key

differentiators between

products

TECHNOLOGY ANALYSIS OVERVIEW



CEB TOWERGROUP COMMERCIALBANKING






6

Current Market Future

Investment

Vendor

Landscape Product Rankings





7

A THREAT TO ECONOMIC AND FINANCIAL STABILITY

Comparing Money Laundering Estimates with

National GDPs

Estimates in Trillions USD, 2011

$7.3

$5.9

$3.6

$3.5

$2.8

$2.5

$2.4

$2.1

$1.9

$1.8

$1.7

USA

China

Japan

Germany

HighEstimate

France

Brazil

UK

Italy

Russia

India

LowEstimate

$15.1

Illicit Financial Outflows from Developing

Countries in 2009

Estimates in Billions USD, 2010

Money laundering activities

undermine the integrity and

stability of financial systems

and institutions by distorting

capital flows and

discouraging international

investment.

The annual volume of money

laundered is vast, potentially

equivalent to 5% of global GDP,

or roughly the size of the German

economy.

In 2008, GFI estimated that

$1.26 trillion of illicit assets

flowed out of developing

countries, depriving their economy

of crucial growth capital.

$194

Americas

$210

Europe

$224

Middle East/

Africa

$559

Asia Pacific

In 2009, Global Financial Integrity

(GFI) estimated that $1.26 trillion

dollars of illicit funds flowed out of

developing countries, $500 billion of

which ended up in Western accounts.

In addition to funding criminal and

terrorist activities, these outflows hurt

the poor in developing countries.

They strip their government and

economy of resources for

infrastructure and human capital

investments and undermine global

development efforts.

Source: International Monetary Fund Estimates

Source: “Illicit Financial Flows from Developing Countries Over the

Decade Ending 2009”, Global Financial Integrity





8

9

12

13

14

17

18

20

21

18

17

16

13

12

10

Politically exposed persons

DNFBPs – R.5, 6, 8-11

Correspondent banking

DNFBP: regulation,supervision and monitoring

DNFBPs – R.13-15 & 21

Wire transfer rules

Cross-borderdeclaration & disclosure

Compliant CountriesNon-Compliant Countries

IDENTIFYING REGIONAL SOURCES OF MONEY LAUNDERING RISK

Although money laundering

is a major problem in every

country, compliance risks

will be higher in developing

countries with weak

governments.

Developing countries in Asia,

Africa, and Latin America have

the highest risk exposure for

money laundering and terrorist

financing.

Traditional tax shelters like

Luxembourg and Switzerland top

the list among industrialized

countries.

In CEB TowerGroup’s analysis of

30 compliance reports published

by the Financial Action Task Force

(FATF), the management of

politically exposed persons (PEPs)

and DNFBP1 were identified as a

common area of policy challenges

for most countries.

Global Areas of AML Non-Compliance

Number of Surveyed Countries’ Compliance with FATF Recommendation

Source: Financial Action Task Force for Money Laundering, CEB TowerGroup Research

1Note: Designated Non-Financial Business and Professions

High Money Laundering Risk Countries

Top 10 Highest Risk Countries

Rank Country Score Risk

1 Iran 8.57 High

2 Kenya 8.49 High

3 Cambodia 8.46 High

4 Haiti 8.16 High

5 Tajikistan 8.12 High


6 Mali 7.88 High

7 Uganda 7.63 High

8 Paraguay 7.57 High

9 Belize 7.44 High

10 Zambia 7.41 High

Top 5 Industrialized Countries


49 Luxembourg 6.17 Med

64 Japan 5.88 Med

68 Germany 5.80 Med

71 Switzerland 5.78 Med

74 Austria 5.74 Med

Source: “2012 AML Index”, Basel Institute for Governance





9

A SERIOUS BUT MANAGEABLE BURDEN

The importance of AML

compliance reflects the

significance of money

laundering risk in banks’

operational models.

In a survey of banking executives

conducted by the European

Commission, money laundering

responsibilities was ranked first

among compliance functions in

priority for resource allocation.

The study also found that AML

compliance does not typically

consume a large proportion of

operating budgets.

The one-time costs for financial

institutions to comply with the EU’s

Third AML Directive consumed less

than 3% of annual compliance

budgets, and ongoing costs are

less than 0.3%.

Rank of Resource Allocation Among Compliance Functions at European Banks

Compliance Function Large Banks Small Banks

Money laundering responsibilities 1 1

Implementing and influencing regulatory changes 2 2

Internal monitoring of business 3 3

Providing advice 3 4

Product and business developments 5 8

Training 6 10

External reporting 7 7

Internal reporting 8 5

Special projects or reviews 8 9

Remedial action 10 6

Average Compliance Costs for Banks Associated with the EU’s Third AML Directive

2.90%

0.29%

0.59%

0.08%

One-Time Costs Ongoing Costs

As a Percentage ofRegulatory Compliance Costs

As a Percentage of TotalOperating Expenses

Source: “Compliance with the Anti-Money Laundering Directive by Cross-Border Banking Groups at Group Level”, European

Commission, 2010





10

A MATURE TECHNOLOGY SPACE

Because of its centrality in

compliance enforcement,

dedicated AML software has

been adopted by most

financial institutions.

In CEB TowerGroup’s survey of

global financial technology

executives, 80% of respondent

institutions have at least one AML

solution deployed.

Half of those that do not yet have

a dedicated AML system plan to

by 2016.

Three-quarters of respondents

state that their investment in AML

technology has yielded high

value.

32%

Have It,

Replacing

8%

Adopting

49%

Have It,

Not Changing

Current AML Technology State at Global Banks

Percentage of Respondents, 2012

46%

Very

High Value

25%

Moderate

Value

29%

Somewhat

High Value

Value Perception of AML Technology

Percentage of Respondents, 2012

N=37 N=24

11%

Does

Not Have

Source: “2012 Financial Services Institutions Technology Adoption Survey”, CEB TowerGroup





11

DEVELOPING AN ENTERPRISE VIEW OF AML MANAGEMENT

AML Enterprise Architecture While the majority of

financial institutions have

formal AML systems, many

still experience serious

issues in executing an

effective strategy.

Gaps in AML controls are

typically symptoms of a siloed IT

infrastructure, in which a bank’s

reliance on disjointed monitoring

systems across various business

units results in an incomplete view

of risk.

When analyzing customer and

transactional data for the subtle

patterns and linkages that betray

money laundering activities,

investigators need access to the

full range of information stored

across the enterprise.

New Customer

CRM System(s)

KYC/CDD Sanctions

Screening

Analytics, Rules and Scoring Engine

Alerts and Case Manager

Core Systems Payment

Channels

Account Access

Channels

Customer Onboarding/Continuous Risk Assessment

Know Your Customer/Customer Due Diligence

Verify the identity of the customer

Cross-check name, tax number, and other personal

info with credit reports and third-party databases

Challenge: Lacking quality external data, banks will

often rely on limited information, such as a single

credit report or incomplete internal white/blacklists

Sanctions Screening

Screen customer names against known sanctions lists

such as the EU, UN, and OFAC lists

Identify politically exposed persons (PEP)

Challenge: Poor customer data held on disjointed

systems, often results in high false positive rates

Alerts and Case Management

Rules and analytics models determine identify high risk

customers/transactions based on a variety of factors

Alert high risk customers/transactions, investigate

cases; analyze, document, and report information

Ongoing Transaction Monitoring

Monitor all monetary and non-monetary transactions

for behavioral patterns typical of ML activity

Challenge: the integration of channels and systems

remains a key obstacle to providing a consistent

analysis of all transaction across the enterprise

Source: CEB TowerGroup Research





12

MULTIPLE REGIONS CAN BE GOVERNED BY A COMMON

APPROACH

Hub Model to Enterprise AML Management For global financial

institutions, national or

regional-level regulations

can be as much a barrier as

deficient technology in the

development of an

enterprise approach to AML.

In many countries, regulatory

requirements may prevent

transaction information from

leaving the country in which the

transaction takes place.

This obstacle to data visibility can

result in a lack of centralized

control that may allow

independent business units to

pursue policies contrary to

corporate standards.

A “Hub” model of enterprise AML

management enables a

centralized approach to policy

governance to be disseminated to

regional or country-level hubs.

These hubs ensure that global

corporate policy is met within the

regulatory context of each

specific region.

Enterprise level strategies

are established and global

compliance is monitored

from a single location.

Regional hubs ensure that

business units corporate

policies are enforced, while

maintaining internal firewalls.






13


Investment

Vendor


14

RO

I Pote

ntial

Market-Ready In Pilot

Low

H

igh

Technology State

EMERGING TECHNOLOGIES IN ANTI-MONEY LAUNDERING

CEB TOWERGROUP COMMERCIAL BANKING AND PAYMENTS PRACTICE © 2012 The Corporate Executive Board Company. All Rights Reserved.

Emerging Technology Matrix

Analytics-

Based

Detection

AML/Fraud

Platform

Convergence

Next

Generation Link

Analysis

Enterprise

Governance

Solutions

Real Time

Processing

Complex

Events

Processing

Integrated

FATCA

Compliance

Anti-

Stripping

Tech

Next-Generation Analytics Emerging Governance Strategies

Analytics-Based Detection: detection strategies that are

based on statistical analysis of transaction information with

flexible parameters such as Bayesian and Neural networks

Enterprise Governance Solutions: technology that enables

AML compliance to be monitored and enforced for all

business lines from a single location

Next Generation Link Analysis: link analysis with dynamic

network view and filtering capabilities

Anti-Stripping Technology: technology that detects when

wire transfer data has been stripped or manipulated

Complex Events Processing: analysis technique that

automates generation of insight from “Big Data”

AML/Fraud Platform Convergence: an enterprise platform

capable of detecting both fraud and money activities

Real-Time Processing: capability to process transaction and

detect AML-linked activity in real-time

Integrated FATCA Compliance: tools that enable banks to

report on financial accounts and foreign entities owned by

U.S. taxpayers

DEFINITIONS

ROI Potential:

Measures the relative

returns an institution

can expect to receive

from an investment in

the technology

Technology State:

Measures the

technology’s level of

development

Workflow Impact:

Measures the level of

change the technology

will have on current

operations and

processes

Minimal

Medium

High

Workflow

Impact





15

THINKING LIKE A HUMAN: BAYESIAN BELIEF NETWORKS

Bayesian Belief Network

(BBN) models replicate the

approach that the human

brain utilizes to make

decisions in contexts of

limited information and high

uncertainty.

BBN models, like people, utilize a

heuristic approach to decision

making, by drawing on contextual

information to infer a most

probable outcome.

By tailoring the detection logic

toward individual cases, BBN-

based strategies yield superior

detection and false positive rates

compared to primarily rules-

based strategies which apply a

one-size-fits-all approach to

money laundering detection.


Nature as a Model

Although rules-based strategies are good at detecting the behavioral patterns that are characteristic of various money

laundering scenarios, the generalized nature of their binary logic often yields high false-positives, creating an excessive

number of alerts that can overwhelm already strained compliance budgets. In order for a rules-based strategy to possess

both high detection and low false positive rates, hundreds, if not thousands of rules customized to every conceivable

account type and customer profile would need to be written and maintained.

In contrast to the static determinism of primarily rules-based strategies, emerging approaches toward money laundering

detection try to replicate the dynamic thought processes of an expert analyst. Studies have shown that in situations where

information is too limited for a person to make a logical choice, humans follow a heuristic or experienced-based approach

to decision making. In this method the human brain draws on a variety of sparse, interrelated contextual data leveraged

from past experiences to establish strong inferences about a decision.

Bayesian Belief Networks (BBN) are statistical models that replicate this heuristic human reasoning. In AML management,

BBN models determine whether a set of transactions should be flagged high risk, not only by matching it to a known

scenario, but also by considering contextual information such as customer demographics, risk profile, and account type. This

enables the BBN model to mark a set of transactions as money laundering not because it is suspicious per se, but is

suspicious within the context of the particular customer.

Illustrative Model of a Bayesian Belief Network for Structuring

Customer

Profile

EDD Risk

Assessment

Peer

Group

Account

Type

Deposit

Amount

Deposit

Frequency

Deposit

Location

Structuring?

Bayesian Decision Thought Process

1. A series of transactions is

determined to match a known

scenario corresponding to

structuring.

2. Is the customer who is

performing these transactions

known to be of high risk?

3. Are these transactions

characteristic of this individual,

this account type, this peer

group? 4. Incorporate available data

into the model to determine

risk score, which determines

whether an alert is produced.





16

Source: FircoSoft, CEB TowerGroup Research

ANALYTICS FOR COMBATING WIRE STRIPPING

The stripping and

manipulation of identifying

information on wire

transfers and other financial

messages, is designed to

circumvent conventional

sanctions screening controls.

Wire stripping is at the heart of

two recent high-profile cases

involving global banks that have

been accused of covering up

transactions they facilitated for

internationally-sanctioned entities.

A promising new strategy created

to identify and block stripped

wires focuses on a “fingerprinting”

approach, which identifies

transactions by matching its

attributes to previously blocked

transactions.

Identifying When a Wire has been Altered

Stripping is the intentional removal of information, such as customer names, bank names, and country origin, from wire

transfers and other financial messages. By concealing the source of wires, stripping allows rogue institutions, or the rogue

elements within an institution, to circumvent controls provided by watch list filtering solutions and facilitate transactions for

sanctioned entities. Stripping became a major source of focus for financial compliance executives in 2012 after it was

revealed to be the central charge in US regulators’ sanctions violation case against 2 European-headquartered banks. In

order to settle their case, these banks paid combined fines of almost $1 billion.

Because the act of stripping removes all traces of a wire’s illicit origins and “repairs” it with manipulated data, it is nearly

impossible for conventional sanctions screening technologies to identify and block stripped transactions. Fortunately a

variety of new strategies have recently been developed by sanctions screening providers to effectively catch and stop

stripped wires. One of the most promising strategies centers around the concept of “transaction fingerprints”. When a

regular transaction is blocked by an anti-stripping enabled screening solution, the unalterable parts of the transaction’s

information (e.g. currency, amount, ordering customer, beneficiary bank) will be stored in a database and captured as a

unique fingerprint. Therefore, even when a stripped transaction enters the sanctions filtering solution, its fingerprint can be

calculated and if it matches any of those in the database, the transaction will be blocked, even though its identifying

information might seem legitimate.

Banking

Applications

(ACH, SWIFT, etc.)

Fingerprint

Database and

Matching Engine

Hits and

Investigation

1. Transaction

Data

2. Matching: Yes

3. Block Transaction?

(Y/N)

Wire Fingerprinting Process

1. Transaction information is sent

to the engine which calculates

its fingerprint to determine if it

matches any known cases.

2. If there is no match the solution

releases the transaction, if

there is a match the solution

sends an alert for further

investigation.

3. Investigators analyze whether

an alert is positive or not and

sets the transaction’s final

disposition, which blocks or

releases a payment.

Fingerprint Stripping Detection Schematic

2. Matching: No

17

ENFORCING AN ENTERPRISE COMPLIANCE STRATEGY

Enterprise View: summary

visualizations provide compliance

executives with a snapshot of

global AML activity

Advance Research: dynamic drill-

down capability for more in-depth

research of high risk countries,

subsidiaries or business lines

Activity Overview: high-level

view of which rules or

detection models are creating

the most alerts

Control Status: automated

analysis of detection

scenarios flag potentially

ineffective rules and models

Monitoring and Enforcing Enterprise Compliance

The key to the effective enforcement of an enterprise compliance strategy begins

with quality data. This however, is easier said than done. The challenge for a

transaction-based enterprise monitoring solution is that it must be flexible and

scalable enough to support the numerous and disjointed source systems within a

single institution. Modern AML systems deploy a wide range of integration

techniques such as ETL, web services, and standard messaging that allow them to

integrate with a variety of source systems ranging from mainframes to web-based

solutions. Furthermore, many of these modern systems will also support advanced

data standardization techniques that convert transactional data from all channels

and systems into a single format that is compatible with its analytics.

The integration of all transactional data through a single analytical engine

provides the technological basis for enterprise compliance monitoring and

enforcement. AML systems will distinguish themselves in this area by the quality

and flexibility of their data analysis and visualizations. The strongest solutions in

this space will include extensive dashboard and information drill-down capabilities

that can provide not only alert and case activity across business lines, but will also

be able to automatically flag problematic detection scenarios and rules, and

enable a structured approach for refining models.










18

Current

Market

Future

Investment

Vendor

Landscape

Product

Rankings





19

MAPPING THE AML VENDOR LANDSCAPE

2 0 0 5 1 9 9 5 2 0 1 0 2 0 0 0

Detica NetReveal Prime Compliance

Suite

Proactive Risk

Manager

Vendor AML Systems

By Date of First Active Deployment1

1 Date of first active deployment is the year in which the solution featured in this report began

supporting AML management processes at a financial institution. Technology providers may have

deployed other AML systems before this date, but was not accounted for in this timeline.

2 Denotes watch list filtering solutions only. As such, these solutions were not compared and scored

alongside end-to-end AML monitoring systems.

Firco Continuity/Trust2 Actimize AML

Suite

FRAML

Wiz Sentri

TCS BaNCS

SironAML

en.SafeWatch

Yellow Hammer Compliance Link2

ASSIST//ck Oracle FCCM

Financial Crime

Risk Management

20

Enterprise Operations

Use

r Ex

peri

enc

e

Detection Tools

20

Anomaly Detection

The system can identify key

transactional behaviors and

patterns in order to

recognize uncharacteristic

transactions.

6 Geographic Capability

The system can discern

money laundering activity in

multiple currencies and

determine geographic

regions and language

differences.

7 Behavioral Modeling

The system supports

detection on new accounts

by modeling likely

transaction behavior as part

of a comprehensive AML

strategy.

4 Link Analysis

The system discerns

connections between entities

and provides visual tools to

monitor and analyze the

nature of those

relationships.

2 Cross-Channel Support

The system supports the

detection of money

laundering activity across

all payment types.

3 AML Typologies

The system identifies and

captures the typology of

money laundering cases to

increase its ability to detect

and prevent similar events.

1 Risk Scoring

The system incorporates

real-time statistical models

and defined business rules

to automatically score all

transactions by potential

risk.

5 Alerts Management

The system provides timely

alerts that accurately flag

money laundering activity

both during and after

transactions.

Case Management

The system offers

comprehensive tools to

manage money laundering

cases and communication

related to litigation and

enforcement.

Routing and Prioritization

The system automatically

routes questionable

transactions to the

appropriate workflow

queue depending on risk,

size, location, or party.

Report Management

The system provides

standard static reports and

a custom reporting tool that

allow users to generate ad

hoc reports.

User Interface

The system possesses an

intuitive, configurable user

interface with dashboards

that utilize built-in workflow

logic to guide users.

11

8

9

10

12

Modularization

The system has multiple

modules that may be

configured and deactivated

to optimize workflow for an

individual user.

14 Security and Permissions

The system provides

authentication and access

controls that satisfy

workflow hierarchies,

reporting, and security and

compliance requirements.

13 False Positive Mitigation

The system manages and

reports false positives

providing feedback loops

that enable adjustments to

risk scoring, customer contact,

alerts, and cases.

Compliance Strategy

The vendor possesses a

proactive strategy for

meeting new regulations

and industry guidelines, and

supports the enterprise

during audits.

18 Systems Integration

The system integrates with

front and back end systems

across delivery channels with

little or no customization from

vendor.

17 Pricing Flexibility

The vendor offers multiple

pricing options with

flexibility surrounding

additional on-going support

packages.

19 Workflow Management

The system supports a

configurable workflow that

integrates to internal money

laundering systems and

additional data sources.

15

Vendor Stability

The vendor has an

established industry

presence and can provide

long term support for

institutions.

Technology Innovation


proactive strategy to

incorporate innovative

technology and strategies

into its product

development roadmap.

Product Maturity


mature product with a

growing market share and

client base.

Product Deployment

The vendor supports

multiple deployment

options, and provides full

support to the enterprise

during deployment.

20

23

22

21

HOW TO USE ANATOMY

The anatomy is designed to assist financial services executives better assess and prioritize components of their technology

investment. As you take this anatomy, please consider your firm’s business strategy and current technology maturity.

1. Rate the impact of each attribute to your business and your firm’s effectiveness on a 1-5 scale using the grading scale

below and tally the results using the scorecard.

2. Map the results on the scorecard on to identify areas that are most important, but where your firm is least effective.

Current Effectiveness Potential Impact

5 = Superior Capability We or our vendor offer this regularly,

systematically, and at the highest standard.

5 = Very High Impact Our firm considers this attribute mission critical

when performed at the highest standard.

4 = Strong Capability We or our vendor offer this regularly

and systematically.

4 = High Impact Our firm considers this attribute highly important

when performed at the highest standard.

3 = Adequate Capability We or our vendor offer this regularly

but in an ad hoc manner.

3 = Moderate Impact Our firm considers this attribute moderately

important when performed at the highest

standard.

2 = Marginal Capability We or our vendor offer this irregularly

and in an ad hoc manner.

2 = Low Impact Our firm considers this attribute somewhat


standard.

1 = Weak or not at all We or our vendor do not do this at all. 1 = No Impact Our firm does not consider this attribute


standard.

Attribute Grading

16

Enterp

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upp

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ANTI-MONEY LAUNDERING DIAGNOSTIC ANATOMY

© 2012 The Corporate Executive Board Company. All Rights Reserved.





21

Score Your Technology

Needs With the Anatomy

Scorecard:

Financial services executives should

complete the scorecard using the

AML anatomy diagnostic tool.

Attribute Categories Alignment Attributes Potential Impact Importance of Improvement

1. AML Typologies

2. Link Analysis

3. Cross-Channel Support

Detection 4. Behavioral Modeling

Tools 5. Risk Scoring

6. Anomaly Detection

7. Geographic Capability

8. Alerts Management

9. Case Management

User 10. Routing and Prioritization

Experience 11. User Interface

12. Report Management

13. Security and Permissions

14. Modularization

Business Process 15. Workflow Management

Improvement 16. False-Positive Mitigation

17. Systems Integration

18. Compliance Strategy

19. Pricing Flexibility

Enterprise 20. Product Deployment

Support 21. Product Maturity

22. Technology Innovation

23. Vendor Stability

DIAGNOSTIC ANATOMY SCORECARD





22

DIAGNOSTIC ANATOMY SCORECARD

Compliance executives

should map their attribute

scores from rating their

impact and effectiveness on

the previous page on this

matrix to identify the most

important areas to their

vendor selection.

Pote

ntial

Impact

5 =Very High

4 =High

3 = Moderate

2 =Low

1 =No Impact 1 =

Weak

2 =

Ma

rgina

l

3 =

Adequa

te

4 =

Stro

ng

5 =

Sup

erio

r

Current Effectiveness

Areas of Focus

23

Feature Definition

Reporting Features

Currency Transaction Report (CTR) The solution supports the manual and/or automated creation of Currency Transaction Reports (CTR) from system data.

Composite Reporting The solution supports the compilation of multiple regulatory reports into one composite report.

On-demand Reporting The solution provides tools for users to create custom ad hoc reports from system data.

Presentation Tools The solution provides reports with graphical and data visualization capabilities.

Suspicious Activity Report (SAR) The solution supports the manual and/or automated creation of Suspicious Activity Reports (SAR) from system data.

Reporting Formats Supported

Excel Reports can be generated in an Excel (xls) format.

HTML Reports can be generated in an HTML format.

PDF Reports can be generated in a PDF format.

Word Reports can be generated in a Microsoft Word (doc) format.

Workflow Tools

Alerts Risk Scoring The solution provide tools to automatically score every transaction for money laundering risk.

Approval Workflows The solution provides standard workflows for alerts and cases to be reviewed by management.

Audit Trails The solution provides audit trails that records the actions performed by compliance analysts for every alert and case.

Customer Risk Scoring The solution can automatically score new customers for money laundering based on a variety of configurable criteria.

Document Versioning The solution can keep track of multiple versions of case documents and attachments for audit purposes.

FATCA Compliance The solution provides tools to enable banks to report on financial accounts and foreign entities owned by U.S. taxpayers.

Process Automation The solution provides workflow tools that enable the automation of alert and case workflows.

Role-based Permissions The solution utilizes role-based permissions and access.

Segmentation By Risk Profile The solution allows financial institutions to configure custom risk segmentations based on a variety of criteria.

Suspicious Activity Monitoring The solution provides real-time or batched suspicious activity monitoring for all transactions.

Tunable Parameters The solution provides tools to refine the parameters of money laundering detection rules and models.

Watch List Filtering The solution provides customer and transaction sanctions filtering capabilities against major watch lists.

FEATURE AUDIT DEFINITIONS

CEB TOWERGROUP COMMERCIAL BANKING AND PAYMENTS PRACTICE


24

Vendor WKFS Vendor A Vendor B Vendor C Vendor D Vendor E Vendor F Vendor G Vendor H Vendor I Vendor J Vendor K

Product Wiz Sentri Product A Product B Product C Product D Product E Product F Product G Product H Product I Product J Product K

Reporting Features

Composite Reporting l m m l l l l l l l

Currency Transaction Report l l m l l l l l l l m l

On-demand Reporting l l l m l l l l l l m l

Presentation Tools l l l m l l l l l l l l

Suspicious Activity Report l m m l l l l l l l l l

Reporting Formats Supported

Excel l l l l l l l l l l m l

HTML l l l l l l l l l l l

PDF l l l l l l l l l l l l

Word l l l l l l l l l l l

Workflow Tools

Approval Workflows l l l l l l l l l l l l

Audit Trails l l l l l l l l l l l l

Customer Risk Scoring l m m l l l l l l l l l

Customer Risk Segmentation l l l l l l l l l l l l

Document History/Versioning l l l l l l l m l l l

FATCA Compliance l m l l l l l l l m

Process Automation l l l l l l l l l l l l

Risk Scoring l l l l l l l l l l l l

Role-based Permissions l l l l l l l l l l l l

Suspicious Activity Monitoring l l l l l l l l l l l l

Tunable Parameters l l l l l l l l l l l l

Watch List Filtering l l m l l l l l l l l l


Standard Feature Premium or Add-on Feature

FEATURE AUDIT






25

WIZ SENTRI WOLTERS KLUWER FINANCIAL SERVICES

Company Overview

A subsidiary of the global information services and publishing company of the same name, Wolters Kluwer Financial

Services (WKFS) focuses on delivering compliance, risk management, and audit solutions for the financial services industry.

The company is organized into three primary divisions: technology, consulting, and data services. WKFS’ technology division

provides software solutions to more than 15,000 clients globally, while the consulting practice delivers expert risk and

compliance advice through tailored engagements. In 2012, WKFS acquired Belgian-based FinArch, extending the

company’s capabilities into integrated finance, risk, and performance management.

Product Overview

Developed in 2003, Wiz Sentri is an enterprise BSA/AML compliance platform. The solution is split into two primary

components: an information and reporting module for compliance executives, and a workflow module for frontline fraud

and AML managers and analysts. The executive module provides compliance heads with a view of risk, financial activities,

and the performance of rules groups and detection models across the enterprise. The workflow modules provide analysts

with capabilities to support customer due diligence, transaction monitoring, and alerts and case management. Deployed on

both a licensed and SaaS model, the solution currently serves North American financial institutions but fully supports

localization and is now being marketed in Europe and Asia.

Product Demonstration Highlights

Behavioral Modeling: In addition to standard tools that help identify risk on new accounts using peer group analysis and

comparing onboarding information with transactional behavior, Wiz Sentri can adjust the sensitivity of detection models

on high risk accounts, such as ones with limited history, which lowers their alert thresholds.

Case Manager: Wiz Sentri’s case-specific workflow enables users to establish activity sequences appropriate for a

particular case type or business unit operational processes. From a single page the investigator can view and manage all

case-related information, including case type-specific information, attachments, notes, and relationships to other cases.

Management Dashboard: Wiz Sentri’s dashboard interface allows for a 360 degree view of threats by type, volume,

and velocity and enables a strategic view of financial crimes through a reports library and bespoke report building

engine. The system also provides the ability to develop customized reports to support an institution’s unique needs.

CEB TowerGroup View

The enforcement of a standardized AML policy across all business lines and subsidiaries is a major challenge for larger

national and global financial institutions. WKFS, more than any other vendor, has developed a robust strategy for how to

effectively address this issue through the Wiz Sentri’s solution’s Financial Crime Governance Risk Module. The module, one

of the first of its kind that we have reviewed, represents a great leap in the development of a true enterprise view of risk

management. From an interface where all data is aggregated, a corporate compliance team can monitor the state of

compliance across all regions where the institution operates, detect any degradation in rules and models in order to

improve them, and develop and implement new strategies from a single location. In addition to its highly user-friendly

alerts management and case management interface, Wiz Sentri’s ability to centralize and distill information earned it 2

“Best-in-Class” ratings for User Experience and Enterprise Operations.

Clients by

Asset Size

Banks and

Credit

Unions

Non-Bank

Financial

Institutions

<$1 B

$1-10B

$10-50 B

>$50 B

Current Clients

None in this Segment

KEY STATISTICS

Company Type: Subsidiary

Parent: Wolters Kluwer

HQ: Minneapolis, MN

Founded: 2006

Employees: 2,300

Revenue: Not Disclosed





26


Investment

Vendor


27

Phase 2

Recognizing that all

attributes are not

equally important, CEB

TowerGroup divides

them into tiers to reflect

their level of

importance as mission

critical, strong priority

or differentiators.

Phase 1

Utilizing qualitative and

quantitative data, CEB

TowerGroup identified

23 attributes that define

a “Best-in-Class” Anti-

Money Laundering

System, which are

grouped into four

categories.

Phase 3

Certain products are

recognized as “Best-in-

Class” after scoring

each product based on

its performance at an

attribute level.

“Best-in-Class”

Detection

Tools

“Best-in-Class”

Enterprise

Support

“Best-in-Class”

Enterprise

Operations

“Best-in-Class”

User

Experience

ATTR

IBU

TES

Mis

sio

n C

ritica

l

AML Typologies

Anomaly Detection

Cross-Channel

Support

Alerts Management

Case Management

False Positives

Mitigation

Systems Integration

Compliance Strategy

Product Maturity

Str

on

g P

rio

rity

Behavioral Modeling

Geographic Support

Link Analysis

Risk Scoring

Reports Management

User Interface

Security and

Permissions

Workflow

Management


Vendor Stability

Dif

fere

ntiato

r Routing and

Prioritization

Modularization Deployment

Flexibility

Pricing Flexibility

CREATING OUR “BEST-IN-CLASS” PRODUCT RANKINGS

CEB TOWERGROUP COMMERCIAL BANKING AND PAYMENTS PRACTICE © 2012 The Corporate Executive Board Company. All Rights Reserved.

Detection

Tools

Those attributes that

enable financial

institutions to identify and

prevent all high risk

transactions and

behaviors across the

enterprise

User

Experience


enhance user productivity

by improving the breadth

and quality of data

Enterprise

Operations


support standardized

AML compliance across

all business lines and

delivery channels

Enterprise

Support


influence the enterprise’s

tactical fit and strategic

alignment with the vendor CA

TEG

OR

IES





28

Overall, high performing

vendors exhibited excellence

in multiple categories.

Product Leaders are the top

scoring products in a given

category and are chosen

based on the differentiation

in scoring in a particular

category.

Detection Tools includes those

attributes that enable financial

institutions to identify and prevent

all high risk transactions and

behaviors across the enterprise.

User Experience includes those

attributes that enhance user

productivity by improving the

breadth and quality of data.

Enterprise Operations includes

those attributes that support

standardized AML compliance

across all business lines and

delivery channels.

Enterprise Support includes those

attributes that influence the

enterprise’s tactical fit and

strategic alignment.

Listed Alphabetically by Vendor

Ranking Methodology

Vendor rankings are

based on our proprietary

5-point rating system for

each of the 23 attributes

in our AML anatomy.

= Best-in-Class in

Anatomy Category

RANKING MATRIX

Detection

Tools

User

Experience

Enterprise

Operations

Enterprise

Support

WKFS Wiz Sentri 4.53 4.73 4.86 4.25

Vendor A Product A 4.35 3.95 4.09 4.50

Vendor B Product B 4.91 4.64 4.82 4.58

Vendor C Product C 3.82 4.24 3.95 3.83

Vendor D Product D 4.35 4.09 4.18 4.50

Vendor E Product E 4.47 4.45 4.50 4.58

Vendor F Product F 3.18 4.55 3.27 4.08

Vendor G Product G 4.82 4.59 4.86 4.75

Vendor H Product H 4.65 5.00 4.82 Not

Scored

Vendor I Product I 4.59 4.36 5.00 4.17

Vendor J Product J 4.38 4.45 4.55 4.58

Vendor K Product K 4.56 4.86 5.00 4.50

29

Vendor G

Vendor G

Vendor G

Vendor G

Vendor E

Vendor E Vendor E

Vendor E

Vendor B

Vendor B

Vendor B

Vendor B

Vendor J

Vendor J

Vendor J

Vendor J

Vendor K

Vendor K

Vendor K

Vendor K

Vendor D

Vendor D

Vendor D

Vendor A

Vendor A

Vendor A WKFS

WKFS

WKFS

WKFS

Vendor I

Vendor I

Vendor I

Vendor I

Vendor F Vendor F

Vendor C Vendor C

Vendor C

Vendor H

Vendor H

Vendor H

0.25

0.50

0.75

1.00

0.5 1 1.5 2 2.5 3 3.5 4 4.5DETECTION

TOOLS

USER

EXPERIENCE

ENTERPRISE

OPERATIONS

ENTERPRISE

SUPPORT

“Best-in-

Class”

Products

“Best-in-Class” Product Rankings Normalized Scores, 0.0 – 1.0 Scale

SELECTING “BEST-IN-CLASS” VENDORS

“Best-in-

Class”

Categories







30

The Wolters Kluwer

Financial Services’ Wiz Sentri

received “Best-in-Class”

ratings in 2 of 4 categories

of CEB TowerGroup’s AML

Diagnostic Anatomy.

User Experience includes those

attributes that enhance user

productivity by improving the

breadth and quality of data.

Enterprise Operations includes

those attributes that support

standardized AML compliance

across all business lines and

delivery channels.

“BEST-IN-CLASS” ACHIEVEMENTS FOR WKFS’ WIZ SENTRI

Category Scoring Analysis

USER

EXPERIENCE

Wiz Sentri provides end-to-end monitoring of all data and behavioral activity and identifies

when suspicious activities are occurring. This facilitates the dispensation of alerts through a single,

easy-to-use investigation and reporting tool set.

Wiz Sentri’s case-specific workflow enables users to establish activity sequences appropriate for

a particular case type or business unit operational processes. Transactions are evaluated by the

solution’s analytics engine which can create an incident. Such incidents in turn create alerts.

Analysis, incidents, and alerts can be classified by type and assigned within a bank-configurable

workflow accordingly.

ENTERPRISE

OPERATIONS

Wiz Sentri is designed to evaluate aggregated activity as well as patterns of activity in order to

minimize false positives. Each implementation includes tuning to ensure that threshold values (to

generate incidents) are set correctly; tuning services are also available post implementation.

From an AML perspective, Wiz Sentri flexibly integrates with other systems through a variety of

methods including ETL and web services. This means a wide array of systems, from mainframe to

web-based, can be monitored using a single set of services, providing additional value for

organizations that have large investments in legacy environments.

31

Enterprise Operations

Use

r Ex

peri

enc

e

Detection Tools

31

Anomaly Detection

The system can identify key

transactional behaviors and

patterns in order to

recognize uncharacteristic

transactions.

6 Geographic Capability

The system can discern

money laundering activity in

multiple currencies and

determine geographic

regions and language

differences.

7 Behavioral Modeling

The system supports

detection on new accounts

by modeling likely

transaction behavior as part

of a comprehensive AML

strategy.

4 Link Analysis

The system discerns

connections between entities

and provides visual tools to

monitor and analyze the

nature of those

relationships.

2 Cross-Channel Support

The system supports the

detection of money

laundering activity across

all payment types.

3 AML Typologies

The system identifies and

captures the typology of

money laundering cases to

increase its ability to detect

and prevent similar events.

1 Risk Scoring

The system incorporates

real-time statistical models

and defined business rules

to automatically score all

transactions by potential

risk.

5 Alerts Management

The system provides timely

alerts that accurately flag

money laundering activity

both during and after

transactions.

Case Management

The system offers

comprehensive tools to

manage money laundering

cases and communication

related to litigation and

enforcement.


The system automatically

routes questionable

transactions to the

appropriate workflow

queue depending on risk,

size, location, or party.

Report Management

The system provides

standard static reports and

a custom reporting tool that

allow users to generate ad

hoc reports.

User Interface

The system possesses an

intuitive, configurable user

interface with dashboards

that utilize built-in workflow

logic to guide users.

11

8

9

10

12

Modularization

The system has multiple

modules that may be

configured and deactivated

to optimize workflow for an

individual user.

14 Security and Permissions

The system provides

authentication and access

controls that satisfy

workflow hierarchies,

reporting, and security and

compliance requirements.

13 False Positive Mitigation

The system manages and

reports false positives

providing feedback loops

that enable adjustments to

risk scoring, customer contact,

alerts, and cases.

Compliance Strategy


proactive strategy for

meeting new regulations

and industry guidelines, and

supports the enterprise

during audits.

18 Systems Integration

The system integrates with

front and back end systems

across delivery channels with

little or no customization from

vendor.

17 Pricing Flexibility

The vendor offers multiple

pricing options with

flexibility surrounding

additional on-going support

packages.

19 Workflow Management

The system supports a

configurable workflow that

integrates to internal money

laundering systems and

additional data sources.

15

Vendor Stability

The vendor has an

established industry

presence and can provide

long term support for

institutions.



proactive strategy to

incorporate innovative

technology and strategies

into its product

development roadmap.

Product Maturity


mature product with a

growing market share and

client base.

Product Deployment

The vendor supports

multiple deployment

options, and provides full

support to the enterprise

during deployment.

20

23

22

21

16

Enterp

rise S

upp

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ANTI-MONEY LAUNDERING DIAGNOSTIC ANATOMY


Scoring Methodology

To arrive at a vendor ranking, CEB TowerGroup developed a proprietary scoring metric outlined by

the attributes within this anatomy that highlights the major elements of an enterprise investment

decision. This metric assumes that every element is not equally important, and therefore assigns a

higher level of importance to those attributes critical to an AML system. The remaining attributes are

then divided further into two tiers to reflect their level of importance, highlighted below.

Tier 1 Attributes

“Mission Critical” Tier 2 Attributes

“Strong Priority” Tier 3 Attributes

“Product Differentiators”

AML Typologies

Cross-Channel Support

Anomaly Detection

Alerts Management

Case Management

False Positive Mitigation

Systems Integration

Compliance Strategy

Product Maturity

Link Analysis

Behavioral Modeling

Risk Scoring

User Interface

Report Management

Security and Permission

Workflow Management


Vendor Stability


Modularization

Pricing Flexibility

Product Deployment





32

UNDERSTANDING OUR SCORING METHODOLOGY

Sample Technology Analysis Internal Anatomy Scoring Guide Illustrative

CEB TowerGroup developed

a unique and proprietary

scoring methodology that

highlights the key priorities

for an executive’s investment

decision.

Every vendor product featured in

this report is scored on against

each of the 23 attributes outlined

in the AML Diagnostic Anatomy on

a standardized1-5 scale.

We calculate the weighted

average of a product’s attribute

scores in each of the 4 categories

of the anatomy to arrive at an

overall category score.

Anato

my

Category Detection Tools Enterprise Operations

Attribute Title AML Typologies False Positive Mitigation

Attribute

Definition

The system identifies and captures the

typology of money laundering cases to

increase its ability to detect and prevent

similar events.

The system manages and reports false

positives providing feedback loops that

enable adjustments to risk scoring, customer

contact, and mgt. of alerts and cases.

Sco

ring M

etr

ic

5 The system provides a wide range of complex ML

typologies out-of-the-box and possesses tools to capture

and translate new scenarios/patterns into new typology

rule sets.

The system automatically reports false positives with

feedback loops to automatically update the detection

parameters.


typologies out of the box, with graphical tools for analysts

to easily develop new typologies.

The system automatically reports false positives, but

adjustments to detection parameters must be done

manually.


typologies out of the box, but requires complex coding to

add or modify rule sets.

The system provides the ability to create manual

reports that can identify where parameters need to be

manually updated.

2 The system provides a limited range of complex ML

typologies out of the box, and requires complex coding to

add or modify rule sets.

The system can integrate with third-party reporting

software to identify flaws within the detection

parameters that lead to high positives.

1 The system does not provide standard ML typologies out-

of-the-box, but is done only through intensive

customization

The system cannot track or monitor flaws within the

detection parameters that lead to high positives.

Attribute Score: 5.0 3.0

SCORE

AMLReport

Documents

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