In the second quarter this year, SWIFT will be launching a compliance analytics tool to help financial institutions better understand their activities on the SWIFT network and thus identify potential risks.
While the tool will not include detailed transaction data (SWIFT only stores this data for 124 days before destroying it), the tool can provide aggregated data. For example, the tool could tell a bank the amount of U.S. dollars it’s been exchanging with any of their correspondents over a specific period.
“You can use that as a way to detect things that could expose you as a financial institution. Some of them could be kind of black and white figures, such as ‘Am I doing any business with a high-risk country?’ If yes, through which correspondents, through which subsidiaries, etc. You could see that right away with the tool,” says Luc Meurant, head of Banking Markets and Compliance Services at SWIFT. “But you could also do more sophisticated things in the sense that because we have the history of transactions stored, we can also help banks see whether there are unexpected patterns versus what had happened in the past.”
While SWIFT cannot know for sure if there is an issue since they do not store data on individual transactions, the aggregated data in the tool “will help banks spot those areas which could be a source of concern, and then banks would dive into those areas for investigation,” says Meurant. So the tool would be a complement to other systems, helping banks prioritize what to investigate. Going forward, if an institution wants SWIFT to store specific transaction data for that particular institution, then that is something SWIFT would consider, but at this point there are no plans to change their data storage model.
SWIFT plans to release the tool in phases, with the first drop coming as early as the end of April. The cost for using the tool will be fixed based on the bank’s size, running roughly between €100,000-200,000 a year. And SWIFT plans to use the rest of 2014 as a time to further develop the tool, finding ways to build upon it; the organization is currently working with four major financial institutions on prototyping the tool.
“This analytics piece is only the top of the iceberg. What we see in the industry today is that banks are faced with huge challenges in terms of reconciling their data. So we see a lot of banks investing quite some money in building MIS (management information system) tools, but also in building data storage tools because one of the key issues that some banks is face is what we call the look back,” says Meurant, meaning that banks need to be able to look back and provide data from the past. “So I do expect many more discussions on that going forward.
“The need for data mining and smart data mining is really important,” he adds. “When you see the number of people that are being employed by banks to review alerts, clearly there is a huge opportunity to help the industry in being more efficient at selecting which alerts should be investigated.”
SWIFT to Launch Compliance Analytics Tool in Q2
In the second quarter this year, SWIFT will be launching a compliance analytics tool to help financial institutions better understand their activities on the SWIFT network and thus identify potential risks.