FinCEN opens up 314(b) to private sector offerings as I-BIRDS takes flight
If you blinked a couple of weeks ago, you may have missed a FInCEN ‘clarification letter’ concerning US Patriot Act Section 314(b) which allows – and encourages – participating financial institutions to share fraud and AML data with each other. In the September 25 article, FinCEN and the US Treasury Department essentially cleared the way for financial institutions to share regulatory information and pool anti-money laundering data. The article points specifically to Arizona-based Early Warning Services’ plan to deliver a contributory-based model under the safe harbor of the 314(b) clause, but more importantly it opens up a larger technology market to capitalize on the growing demand for data sharing amongst Financial Institutions.
An innovative new program called I-BIRDS™, Infoglide Software Corporation’s solution for secure data sharing among communities of financial institutions, is now starting to take flight as a result. Currently, several of the largest U.S. banks are in private discussions around a live implementation of the I-BIRDS program, and an announcement is expected in early 2013.
I-BIRDS, or Inter-Bank Intelligent Risk Data Search, is an initiative originally created by Infoglide to address the 314(b) market space in a secure, data-privacy compliant method. Unlike proposed competitive offerings, I-BIRDS does not require individual banks to contribute their data for inter-mingling with other banks. All Fraud and AML data sits and remains behind the banks’ respective firewalls. When an individual bank sends out a request to the I-BIRDS community, only risk scores are returned. No personally identifiable information (PII) is returned. This gives the querying bank enough information to suggest that their person of interest has either defrauded another institution or not. Clearly, this is extremely valuable information that is just not available anywhere else.
Let’s be honest… it is the dream of most software companies to find a market that is fresh, untapped, and waiting for a product to fill the void. Infoglide’s I-BIRDS is a product that is ready for this opportunity. Not surprisingly, the piece that is driving the upcoming adoption of I-BIRDS is our old friend ‘regulatory compliance’. Nothing motivates markets the way legislative compliance does, and the realities around technology for 314(b) are no different. The FinCEN note in September makes it clear that this type of data sharing will quickly become the norm instead of the exception.
As more and more financial institutions are expected to adopt the I-BIRDS methodology for data sharing, it will become evident that the community sharing mechanism goes beyond 314(b). Consider this – the customer on-boarding process at any bank must include three key components according to Section 326 of the US Patriot Act. These components are Identity Verification, Name Screening, and Risk Scoring. Currently much investment is made by banks to companies such as LexisNexis, ID Analytics, Early Warning Systems and others to comply with these regulations. Now imagine how I-BIRDS will revolutionize that market, and allow financial institutions to work both with those data providers and amongst themselves in a community compliance methodology. It is one of the true game-changers of the 21st century battle against fraud and money laundering for terrorist activities.
So, it would seem that an under-appreciated statement from FinCEN back in September has a tremendous amount of meaning to U.S. financial institutions looking to comply and fight fraud. Some combination of contributory data models and I-BIRDS is going to happen. And we think it’s going to happen soon.