There are numerous compliance regulations that financial service providers must align themselves with, put in place to prevent fraud and other illegal activities. And while the intention here is a beneficial one, it can be difficult for finance institutions to parse through the necessary data to ensure their organization is fully compliant.

In the past, this had been a big issue for money transfer organizations, which facilitate the movement of payments of all sizes. In order to comply with Department of Justice regulations – particularly those dealing with tracking transactions above a certain amount – money transfer companies must be able to quickly and efficiently respond to the Department of Justice and the subpoenas issued in relation to potentially fraudulent or illegal payments. This demands a certain level of visibility that can only be enabled through the expert data aggregation of knowledgeable data as a service providers.

The Department of Homeland Security can also issues subpoenas related to "persons of interest" under the Financial Anti-Terrorism Act of 2001. This requires the financial institution to respond to the subpoena with information about money movement by the subject.

The $10,000 Rule: Flagging and Tracking Transactions

Customers utilize the services of money transfer organizations for a whole host of reasons, including to make payment to other groups or entities for services rendered.

However, transfers could also potentially be leveraged for fraudulent activity like money laundering, or other illegal purposes. In an effort to combat these occurrences, financial service providers as well as individual persons must comply with the Bank Secrecy Act. According to the Internal Revenue Service, this act requires any business or person who receives a payment equal to or over $10,000 to properly report the transaction using Form 8300. In this way, governing bodies have the information necessary to track payments and clamp down on those attempting to evade paying taxes or profiting from illicit activities.

Because criminals can be savvy individuals, some will attempt to send multiple transactions that fall just under the $10,000 mark. Often they will use different offices to send money and "bounce" funds between offices received by accomplices, who take a cut for then passing the money on to the actual recipient or a further accomplice. This complicates matters, especially when it comes to the compliance of the financial service providers facilitating those transactions. When and if a governing body like the Department of Justice gets wind of a financial transfer of this kind, the money transfer company supporting it must be prepared to respond to a subpoena with all the correct data associated with the transaction.

The problem: Complications with disparate legacy systems

Financial service providers and money transfer companies are responsible for countless transactions in a single day. Without the support of the right technology and associated analytics strategies, it can be incredibly difficult to aggregate and pinpoint the data needed to respond to requests from governing organizations like the DOJ. Due to their importance, however, this is a process that financial institutions cannot overlook and therefore must improve.

Complicating matters is the fact that many financial service providers still operate with outdated and unsynchronized legacy systems in place. According to IDC researchers, the financial service industry will account for the lion's share of the estimated $2.7 billion spent on IT services through 2020. Much of these resources will be used to upgrade aging infrastructure systems struggling to handle current demands as part of the industry's "digital transformation effort," Fintech Innovation noted.

Money transfer organizations beholden to compliance regulations for payment fraud prevention require the assistance of more advanced IT strategies. The solution here comes in the form of data aggregation, expertly carried out by a data as a service provider like Unifi.

Western Union's deferred prosecution agreement

When an organization is non-compliant and does not assist in the prevention of payment fraud, it could see an array of negative consequences, including monetary penalties and other enforcement actions. Such was the case with The Western Union Company when, in January 2017, the organization agreed to enter into a deferred prosecution agreement with the Department of Justice stemming from its failure to cease activities connected with wire fraud.

The Department of Justice reported that Western Union admitted to criminal violations including a willful failure to support an effective anti-money laundering program. As a result, the company was made to forfeit $586 million.

"Our investigation uncovered hundreds of millions of dollars being sent to China in structured transactions to avoid the reporting requirements of the Bank Secrecy Act, and much of the money was sent to China by illegal immigrants to pay their human smugglers," U.S Attorney Eileen M. Decker explained.

Expert data aggregation helps a global money transfer company maintain compliance

A well-known money transfer company was also the subject of a deferred prosecution agreement in 2012 in connection with an investigation of its fraud compliant data and consumer anti-fraud program. However, the company looked to considerably enhance its compliance efforts with the help of data aggregation expert and data as a service provider Unifi.

Prior to the implementation of the Unifi Compliance Data Hub, the financial service provider outsourced subpoena requests to a third-party professional services company to pull the relevant data. This process wasn't only complicated and time consuming – it was also an expensive endeavor. This situation caused the money transfer company to seek out an improved solution which would enable it to have the type of single view of critical data required for compliance in the financial service industry.

Unifi worked with Cloudera to establish a compliant Data Hub, capable of aggregating the more than 1200 data sets the money transfer organization utilized to store transaction information. The money transfer company has the ability to streamline its response process and search the entirety of its data according to a single customer's name. This enables the financial service provider to quickly and easily pinpoint whether or not an individual has participated in potentially fraudulent transaction activity. For example, a compliance analyst can now enter the name of a person of interest subpoena request directly into their Compliance Data Hub and using the search capability within Unifi and get the result in minutes rather than weeks.

The results of this initiative have been incredibly beneficial for the global money transfer company. In addition to being able to more efficiently respond to DOJ requests, the company is in the best position to maintain an optimal anti-money laundering program that supports its overall compliance. Now that the financial service provider has a centralized Compliance Data Hub deployed, they are investigating how to extend the analyst access to insights. For example, the Global Data Protection Regulations in Europe pose challenging compliance monitoring issues – Unifi's RegAlert! Solution for GDPR monitoring will be deployed to automatically block access to GDPR-controlled data and alert data stewards to grant access to the request once compliance is assured.

To find out more about how data aggregation through data as a service contributes to compliance, and the work Unifi took part in with this global money transfer company, contact us today.