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Case Study

Transaction Monitoring Optimisation
A fit for purpose alerting system, especially in detecting money laundering should effectively capture placement, layering and integration of illicit funds into the system. Given the nature of the customer behavior involved in financial crime cases, simple business rules are not very effective. Further, like any other crime behavior detecting system, these models have very short life span and event occurrences are quite rare.

Analytical modeling for detection of anomalies requires careful consideration of all available external and internal information. Given the rarity of these occurrences, classical regression-based methods are augmented with ‘profile modeling’ techniques to arrive at factors of importance. Finally, the model is suitably adjusted through an iterative threshold tuning process during implementation and usage.

In summary, the solution is arrived at through the development of the following solutions

  • Profile models based on customer [and/ or its peer] attributes to arrive at a suspicious behaviors detection
  • Arrive at a cutoff through iterative tuning of model parameters and threshold adjustment to control false positives

The model is finally implemented in a monitoring system that integrates all the data from various sources to score and generate alerts for operational review and investigation followed by appropriate actions and dispositioning.

  • Profile Modeling

    • Customer profiling with respect to peer
    • Profiling with respect to historical behavior
    • Detection of suspicious trends using variance methods
  • Threshold Tuning

    • Effect of attribute tuning on the suspicious behavior scores
    • Impact on various scenarios based on changes of score and thresholds
    • Coverage of “Suspicious Activity Reporting” and extent of false positives

The benefits are quite wide ranging. First and foremost, it ensures that your system is able to implement red flags as and when they emerge. Besides, a banking system that deters illicit elements from exploiting the system is a preferred choice for your valuable customer. Lastly, regulators may one day refer to you as the ideal for dealing with the BSA/ AML issue.

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