We noted with interest the April 23 announcement that FIS, the largest banking and payments technology provider on the planet, has made very strategic acquisitions of Memento Security and ICS Risk Advisors.  With over 30,000 worldwide employees and annual revenues approaching $6B, FIS holds the leadership position in payment processing, core banking solutions and risk-management services in multiple markets and geographies.

Infoglide Software Corporation is a proud, close-knit strategic OEM partner to Memento, the Massachusetts-based leader in enterprise fraud management.   The relationship between Infoglide and FIS/Memento allows the latter to expand its global product offerings to include Infoglide’s patented and industry-leading federated search/match/link analysis technology, Identity Resolution Engine™.  The IRE link analysis software – the same technology used by TSA to screen terrorists – allows financial institutions to easily expose high-risk entity matches and social links across disparate internal and public data sources.

We note, too, that the 2010 IDC Financial Insights report listed Memento as a “Category Leader”, the highest level award in the study.  The report examines financial crimes management solutions that anticipate, detect, analyze and prevent fraudulent transactions, money laundering and employee financial misconduct.  Memento’s key differentiators are its search engine approach to data management, its portfolio approach to analytics, and its managed service delivery model.

With that in mind, it seems clear that the true industry giant FIS intends to deliver on its promise of growth by both organic and strategic acquisition means.  We believe the Memento technology adds tremendous value to their portfolio, and we congratulate them on their decision to acquire both Memento and ICS Risk Advisors.

With innovative new offerings including Inter-Bank Intelligent Risk Data Search (I-BIRDS™) and New Account Opening and Synthetic ID Fraud,  Infoglide looks forward to being part of what is shaping up to be an exciting few years of industry growth.

At the RSA Security Conference in February Bruce Schneier an internationally renowned security technologist and Chief Security Technology Officer of BT refers to Big Data,

“… as an industry force, like we might talk of Big Tobacco or Big Oil or Big Pharma”

Schneier is correct, according to a report entitled “Personal Data: The Emergence of a New Asset Class” published in 2011 by World Economic Forum, personal data is becoming a new economic “asset class” the “new oil”. It is amazing; according to an IDC report the amount of data saved and collected by 2020 will be 35 trillion gigabytes.

Schneier defines companies like Google, Apple and Amazon as “Internet magnets’ that drive the collection of these large amounts of data. Data that, because of its sheer quantity, becomes unmanageable, dirty and according to some definitions becomes “big data” . According to the experts contributing to the World Economic Forum report:

… At its core, personal data represents a post-industrial opportunity. It has unprecedented complexity, velocity and global reach. Utilizing a ubiquitous communications infrastructure, the personal data opportunity will emerge in a world where nearly everyone and everything are connected in real time. That will require a highly reliable, secure and available infrastructure at its core and robust innovation at the edge. Stakeholders will need to embrace the uncertainty, ambiguity and risk of an emerging ecosystem. In many ways, this opportunity will resemble a living entity and will require new ways of adapting and responding. Most importantly, it will demand a new way of thinking about individuals.

The truth is that social network companies are not the only businesses that accumulate and control “big data”. Schneier’s definition of the big data industry as “companies that collect, aggregate and use personal data’ really describes every major worldwide business enterprise. Because of this worldwide use of this data, Schneier sees the control of “big data” as a possible security issue from the perspective of the consumer, and that is true. The need to increase “the control that individuals have over the manner which their personal data is collected, managed and shared” has got to be a top priority of any enterprise that collects personal data and the society as a whole. If individuals get the sense that data is being used for purposes that they don’t know about or trust they will simply render the data useless by manipulating and falsifying their information.

Identity and Entity Resolution tools like those developed by Infoglide can be used to provide the means to increase the value of ‘big data”. Many IT managers equate Identity Resolution with fraud elimination and protection processing. But, as this “new asset class” is further defined, accepted and the need for functional safe data increases, Identity Resolution can be utilized for ‘big data” processing across multiple platforms.

Over the past few years, conducting business with the U.S. or dealing with the U.S. customers has bothered many foreign companies, more so prevalent in the finance industry. The newest spoke put in the wheels of foreign companies is the Foreign Account Tax Compliance Act (FATCA), signed into U.S law in March 2010 is coming into effect on January 1, 2013.

The legislative intent of FATCA is to ensure that the U.S. Government is able to determine the ownership of U.S. assets in foreign accounts. FATCA is about transparency and disclosure, but its aim is to catch Americans who are trying to hide money from the tax man overseas. It enlists the help of Foreign Financial Institutions (FFIs) to do it, requiring them to identify their U.S. account holders, name them and even to withhold when Americans do not disclose the existence of such funds.
It is not only U.S legislation, but also has implications for all financial institutions operating outside of the U.S.

On February 8, 2012, proposed regulations for the next phase of implementing FATCA were released. The regulations set out the process through which participating FFIs will prepare to comply with FATCA in areas such as: entering into an agreement with the IRS; identifying accounts held by U.S. persons, identifying entities in which U.S. persons hold a substantial ownership interest, information reporting and tax withholding requirements in certain situations.

The obligation for the FFIs to report information on customers, individuals and businesses that are known to be, or might be liable for U.S. tax treatments. Certain payments made after December 31, 2012 from FFIs will require disclosure compliance agreements to be entered into with the U.S. Department of the Treasury, and all those termed ‘Non-Financial Foreign Entities’ (NFFEs) must report and/or certify their ownership or be subject to a 30 percent withholding tax.

Organizations that choose not be compliant with FATCA, termed as ‘Non-Participating’ (NPFFIs), are subject to a 30 percent tax withholding on all U.S. sourced ‘Fixed or Determinable Annual or Periodical’ (FDAP) income made to their account holders.
This new system of reporting and withholding will impact account opening processes, transaction processing systems and ‘Know Your Customer’ (KYC) procedures used by foreign banks. Chief compliance officers, those responsible for reporting taxes and other key players within these organizations will need to evaluate the potential impact of these regulations and develop a plan for managing and resolving any potential risks brought about by not complying with FATCA.

FATCA is expected to radically affect the systems and operations of both U.S. and non-U.S. organizations. Even though the regulations have not yet been finalized, companies will need to make modifications to their internal systems, controls, processes and procedures for timely compliance with these regulations on or before its effective date.
The effective date for FATCA compliance concerning U.S. institutions is January 1, 2013. Non-U.S. institutions have been granted a further six month grace period before the regulations come into force on July 1, 2013.

It should not come as a surprise to learn that financial institutions are struggling with the increased demands of the new anti-money laundering and tax regulations imposed under FATCA.

Some companies have yet to begin implementing the new FATCA regulations, and many do not have enough of an understanding of the requirements of existing due diligence and KYC processes. Many are still learning about FATCA and have yet to put compliance systems in place.

FATCA will force global financial institutions to re-evaluate and invest in their programs and technology to ensure compliance while aiming to reduce the impact on their customers.

It would not be wise to wait until these regulations come into force before beginning to assess one’s needs and respective costs for compliance. By conducting the proper compliance risk assessment now and evaluating necessary changes to a company’s existing systems, that organization will be equipped with the information to determine the proper level of risk required in order to comply with these new withholding and reporting rules.

Companies should not delay the response to and preparation for FATCA compliance, given the extensive changes to processes and systems that can be required to comply with FATCA, in order to meet the extensive data gathering, management and retention requirements.

Banks, as an institution that does any business with the U.S., will need to adopt the processes, procedures, and systems necessary for FATCA compliance, whether the institution has named U.S. account holders or not.

If NPFFI status is opted by an FFI, it in effect means that it has no business with the U.S. In such a case the FFI is cut off from one of the world’s largest economies and is limited to offering specialist services to very niche corners of the market. This is bound to damage an organizations reputation and its ability to retain and secure high net-worth clientele, and mislays its competitive edge.

In some cases, FATCA will require data that an institution may not already be recording or may simply have incorrectly recorded or maintained . Data as required by FATCA includes country of citizenship, birthplace, permanent residency, whether an account is in trust or under a power of attorney, operate from a P.O. Box or ‘in care’ address, or if an account has requested ‘hold mail’.

An Identity Resolution solution such as Infoglide IRE can help gather the necessary information so that organizations can meet the compliance standards under FATCA.

A financial firm has to discern where the customer data is located, whether it has the correct information, and what data fields it may need to populate in the event the information is incomplete, given the multiple databases in branch offices and business units. The idea follows similar principles to customer due diligence programs, which in turn help firms comply with anti-money laundering regulations. At the core of such an analysis is a thorough understanding of customers, which comes from capturing, analyzing and maintaining customer data.

Banks and financial institutions with low data quality might struggle to comply with this requirement because they would lack of a single window view of multiple instances of the customer/recipient or beneficial owners. It is therefore imperative that they put an identity resolution solution in place, as failure to do so is not an option.

That is the question.  Or is it?

We all know that financial institutions compete with each other at every turn.  They are all in the business of earning our business, so to speak.  One thing they share, however, is the need to be compliant across many different governmental requirements as they do so. 

Privacy, Disclosure, Fraud Prevention, and Anti-Money Laundering (AML) efforts require financial institutions to assist government agencies to detect and prevent terrorist financing.  Fines for non-compliance are heavy, and damage to reputation for penalized institutions directly affects top line revenues.  As a result, banks have implemented a variety of technology ‘point’ solutions across compliance efforts. 

Individuals looking to launder money, however, are typically well-informed and patient.  Their ability to test institutional alert thresholds, modify identifying attributes and seamlessly move from institution to institution is well documented.  As a result, when one bank works through the AML investigation triage process, the others remain completely unaware and are ‘sitting ducks’ for the terrorists’ next move.  Since it’s not feasible – and often unlawful due to data privacy laws – for banks to openly share their data with each other, fraudsters and terrorists easily move on to the next target bank.

Yet the U.S. Patriot act specifically addresses data sharing as an element of AML.  Specifically, sections 314(a) and 314(b) provide guidelines and a ‘safe harbor’ mechanism for organizations to share sensitive data with The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), and with other financial institutions.

Section 314(b) specifically addresses voluntary data sharing between financial institutions. The section permits and encourages financial institutions, upon providing notice to the US Department of Treasury, to share information with one another in order to identify and report activities that may involve money laundering or terrorist activity.  In fact, a financial institution or association that shares information pursuant to this section is protected from liability under the safe harbor.

Many financial institutions, however, are reluctant to share information because of the complexity involved in determining the specific activities or transactions that may be considered money laundering or the fear that confidential information will somehow be inappropriately disclosed by a downstream recipient.  Throw in the reality that the voluntary process is largely manual – with large gaps in efficiencies – and it becomes clear that the system is in need of a technology infusion such as that provided by a new program called Inter-Bank Intelligent Risk Data Search (I-BIRDS).

I-BIRDS is a collaborative, member-based AML technology framework created by Infoglide Software Corporation (ISC) of Austin, TX.  In consultation with leading financial institutions and industry experts, ISC has developed a secure method for banks to perform AML due diligence by searching into each member’s known ‘bad guy’ data.  Unlike traditional search capabilities, I-BIRDS searches the data en situ (behind the secure firewalls of each member) and accounts for spelling and cultural variations of attributes and data quality. 

The key to maintaining this inter-bank framework is Infoglide’s flagship Identity Resolution Engine™ (IRE) software. With IRE at the core, I-BIRDS provides unique, patented capabilities to search into member data stores, and return only a mathematical probability that a match or relevant social link to the source data was found.  No defining attributes are ever returned to the requestor; only the probability that the search criteria exists in other members’ risk data.  To help banks become more compliant,  I-BIRDS delivers an accurate view of whether or not an entity is likely to have committed fraudulent acts upon a competitor bank.  Armed with this information, the querying bank can make decisions as to what – if any – additional due diligence might be required before approving or disapproving a transaction with that entity.

Even though no identifying attributes are returned, the search is productive as the enquiring bank knows that the person of interest was found in the AML data from other participating institutions.   So, if the question is whether or not to improve compliance efforts and keep terrorists out of our financial institutions via 314(b)… perhaps the answer is I-BIRDS.

Douglas Wood, Infoglide Senior VP

I confess. I have ‘borrowed’ some product and sales messages from people outside of the company from time to time. But, in fairness, these people are usually recognized industry experts. Take Ken Rijock, for example. Mr. Rijock is a former banking attorney at an international law firm. He’s also a former money launderer. He spent the 1980s as a money launderer and adviser to drug traffickers until he was arrested and served a U.S. federal prison sentence for racketeering and money laundering. I recently re-read several installments of his Confessions of a Money Launderer series, which outlines a serialized account of his escapades while on the other side of the law.

We previously posted about Mr. Rijock’s writings back in October of 2007, but the information seems just as relevant today as it did back then. The issue of Anti-Money Laundering (AML) continues to be front and center for the global financial services industry, and as a group we continue to learn new and innovative ways to solve the problem.

To that end, the American Bankers Association (ABA) holds its annual Anti Money Laundering Conference in Washington, DC, next week. Beginning Sunday, November 13th, the conference runs through Tuesday the 15th and looks to be very well attended once again. The conference is a great venue for BSA/AML compliance officers, in-house and outside counsel, fraud officers and investigators, bank auditors, regulatory officials and consultants. According to the ABA, this conference reflects “must have” content for BSA/AML compliance professionals.  It’s hard to argue that statement, given the robust agenda that has been put together.

The lineup of speakers this year includes the ABA president Mr. Frank Keating and the director of Financial Crimes Enforcement Network (FinCEN), Mr. James Freis. Additionally, a solid lineup of key industry players are involved in the sponsorship of this year’s event, including Infoglide Software Corp., LexisNexis, NICE Actimize, Palantir Technologies, and World-Check (home of the Confessions of a Money Launderer series).  Infoglide, who hosts this industry blog site, will be at Booth 407 exhibiting their industry-leading Identity Resolution Engine (IRE) product for Fraud and AML detection/investigation.  Please come by and visit us, because I truly believe that we have ‘borrowed’ all of the right pieces from industry experts to make our technology a viable solution for the banking and financial services industry.

There. I’m glad I got that off my chest.

On the heels of recent news that the Infoglide-powered TSA ‘Secure Flight’ program has received a 2011 Technology Innovation Award from Government Computer News comes word that FICO, the leading provider of analytics and decision management technology, has announced that it is enhancing its risk management and fraud detection applications by incorporating Infoglide’s market-leading Identity Resolution Engine® (IRE) software. Infoglide’s IRE will serve as the identity resolution engine and link analysis solution across FICO’s suite of fraud detection and risk management products, which include the industry-leading FICO™ Falcon® Fraud Manager for credit grantors and FICO™ Insurance Fraud Manager.

More:  See the announcement here.

Having worked with the leadership team at FICO now for many months, I can attest to their deep underlying commitment to bring only the best analytic capabilities to market. With the tight integration of Infoglide and FICO products, fraud investigators can identify customers with greater precision, and use link analysis to find connections between transactions, people, third parties and discrete fraud events that can reveal previously hidden fraud schemes. The combined capabilities expand the view of the fraud investigator and enable the identification fo more complicated fraud patterns, criminal fraud rings, and networks of collusive participants that might otherwise appear disconnected from the fraud problem.

Infoglide is thrilled to be teaming with an undisputed market leader, and we are already working diligently with their product team(s). FICO will first focus on integrating Infoglide’s capabilities with FICO Falcon Fraud Manager and FICO Insurance Fraud Manager, in order to enable the many users of these solutions to drive more effective fraud investigations and prevent the most complex fraud schemes, often involving multiple individuals and organizations.

As part of the partnership commitment by both parties, Infoglide will be attending FICO World in New York City from November 1 – 5.   I hope to see you there!

By Mike Betron

Infoglide VP and GM of Social Identity Services

In the hit television series 24, Jack Bauer needed accurate information for split second decisions in “real time.” It was a matter of life or death for the characters in the show – even subtle discrepancies could mean the difference between Bauer trusting someone or deciding that he or she was a terrorist. Knowing the facts – in their most current status – was imperative for him to function. On the show, Bauer could rely on Chloe, his contact at the Counter Terrorist Unit to give him the latest assessment of the situation so he could decide on his next course of action.

For most financial institutions, however, finding a person of interest is not as simple as dialing up Chloe. In a recent survey commissioned by Infoglide to 230 managers, directors, and VPs in charge of managing fraud/risk/security at the top 100 banks in the US,  over a 1/3 of all participants responded that their most critical challenge to solving fraud was their inability to effectively find persons of interest in real time across all of their data. Oftentimes, even when a bank has usable information, they can’t put the pieces together in time to solve the puzzle.

Part of the issue lies in the massive quantities of data that financial institutions have to search through. According to our survey, the average investigator at a bank searched four different systems, with many of the larger banks needing to search over 7 data sets or systems.  

Another issue identified in the survey is the lack of data sharing between departments. For example, less than half of all banks even share a common case management tool across their departments.  Collaborative efforts are either manual or nonexistent for over 50% of all banks. John Doe might be defrauding the commercial side of the bank and laundering his newfound wealth, but the bank is not be able to pinpoint that it is the same person. Where is Chloe when you need her?

Banks that suffer these issues should strongly consider Infoglide Identity Resolution Engine (IRE). With IRE, they can connect to all of their data sources – internal and third party – to search for persons of interest in real time.

The stakes may not be life or death, but with banks under increasing regulatory and compliance pressures, there exists the same Bauer-esque need to make good decisions in real time about the interactions they have with customers.  Missed opportunities to stop fraud and/or money laundering are costly and painful.  Sorry, Chloe… but IRE has your job now.  It provides the real time intelligence, real time threat detection and real time decisions that you used to give to Jack… 24 hours a day.

Infoglide Software Corporation would like to congratulate their TSA Secure Flight program team in Annapolis Junction, MD, as one of the ten projects chosen for Government Computer News (GCN) “Outstanding 2011 IT Achievement in Government.” As regular readers of this blog know, Infoglide’s identity resolution technology sits as the core risk engine of the Secure Flight program.

According to GCN.com, “The teams behind the winning projects, chosen from a list of more than 200 nominated, share a commitment to drive down costs and displayed the leadership and engineering skills needed to put the power of some of the worlds biggest computer facilities into the hands of individual citizens and professional end users.”

An article on GCN.com explains the program thusly:  “After Sept. 11, 2001, when airlines failed to coordinate a successful watch list system on their own, the 9/11 Commission recommended TSA take on the challenge. With the Secure Flight Program, TSA put its IT brain trust up against the daily threat of deadly force. The challenges were unprecedented: perform real-time matching for all flights, including reservations made in advance and at the last minute, while permitting airlines to submit data up to 72 hours before departure. Secure Flight set up new processes, data exchanges, applications, IT hardware and infrastructure, and established support systems for a consistent watch-list matching process. The management and technical ingenuity behind the project has stood the test of time for 10 years.”

A leading provider of entity analytics software for critical cross-database ‘Search / Match / Link’ applications, Infoglide Software provides technology that allows single-request searching into multiple databases without the need to move or clean data.  With a best-in-class library of over 50 algorithms accounting for variations in names, addresses, dates and other attributes, the technology points to who’s who… and who knows whom… despite data quality problems and/or deliberate attempts to deceive. 

I noted with interest the August 31 announcement that IBM is buying UK based i2 Inc.  I was in my hotel room when I read the announcement, attending the International Association of Financial Crimes Investigators (IAFCI) conference in Charlotte.  I was actually so surprised that I dropped one of my shoes onto the floor as I was hurrying out of the hotel room.

Perhaps I should not have been so shocked, though.  It was clear to me that the 2009 COPLINK/i2 ‘merger’ never quite developed the way either party had intended, and that neither entity was working particularly well with the other. Looks like IBM saw the same thing and swooped in to put the pieces together.  Good play on their part.

With loads of customers in several countries, i2 is a large provider of intelligence analytics for crime and fraud prevention serving the banking, defense, health care, insurance, law enforcement, national security and retail markets.  I suspect that IBM’s plans will include integrating the i2 and COPLINK platforms into the overall Infosphere portfolio, particularly the Identity Insights solution formerly known as Entity Analytics Solution (EAS).  With a new base of customers in which to up-sell software and services, IBM looks well positioned to take on SAS and other behemoth players in the fraud analytics business.  Or are they?

I don’t expect SAS to sit on its hands.  They never do.  Although more traditionally thought of as a NIH shop, I would expect some rapid bulking up on their part.  And what of HP?  The acquisition of Autonomy was interesting to say the least.  I find it hard to believe they are going to stop there.  Even BAE Systems is ready with their recent purchase of Detica/Norkom and the Netreveal platform.

In the meantime, startups such as Palantir Technologies and Infoglide Software continue to make major strides in building our respective next-gen technologies and customer bases. I am particularly proud of our Identity Resolution Engine product and MinorMonitor offerings.  The former provides cross database single-request fuzzy searching, social link discovery, anonymous resolution for data privacy and real time red flag analytics for commercial and government clients.  MinorMonitor is our free web tool that – using the same core technology used to keep terrorists off of airplanes – alerts parents on what their children are being exposed to on Facebook.

The possibilities are endless heading into the fourth quarter.  What’s going to happen next?  I’m not sure.  I expect that other shoe to drop sooner rather than later, though.

IAFCI has members across the world in every major continent, broken down by about one third law enforcement, one third banking and one third retail and service members.  The membership dovetails nicely with Infoglide’s customer base.  With a presence in major retail organizations, top global banks and mission critical government agencies, it is evident that Infoglide’s Identity Resolution Engine (IRE) is a tool that financial crimes investigators are excited about.

If you’re in the business of detecting and investigating financial crimes, AML and fraud, you know what it’s like to perform endless searches into disparate data sources looking for that golden nugget of information.  It’s worse than trying to find a needle in a haystack.  In fact, the needle itself is usually spread across  several haystacks.  Fortunately, Infoglide’s  patented IRE software helps  financial crimes investigators quickly identify ‘persons of interest’ within those haystacks of data.  Here’s how:

1. Enterprise-wide Identity Resolution: allows single-request searching into multiple databases without the need to move or clean the data.  Accounting for variations in names, addresses and other attributes, it eliminates time and effort in triaging fraud cases, and allows analysts to focus on the high-return cases.
2. Social Link Discovery: looks at non-obvious relationships between individuals across databases.  By understanding, for example, that a loan applicant shares an address with the loans officer, and also shares a telephone number with a known fraudster, a company can gain immediate insight into the risks associated with that transaction.
3. Anonymous Resolution for data Privacy: allows organizations to productively search into restricted databases without violating international data privacy laws.  The analyst can understand if a match was ‘likely’ found in the restricted data, without ever seeing or retrieving the actual results.
4. Real Time Read Flag Analysis: is the proactive implementation of the technology that looks at incoming transaction and compares them to internal and third party databases to understand possible identity matches and non obvious relationships.  If one is found, the software triggers an instant alert.

So, if you or someone you know is heading to the conference, please stop by to meet us.  It’s possible those haystacks aren’t quite as intimidating as you thought.