Monday, October 15, 2007

"Unusual" account activity?

I have been quite vocal about anti-money laundering (AML) measures put in place by banks to help combat fraud. Industry insiders, including those working for AML solution providers maintain that while banks are forced to put measures in place in order to avoid regulatory fines, no one can say with any certainty whether the millions being spent on AML and anti-fraud measures is actually working.

I alongside others have argued for a review of AML measures and legislation, which has not been forthcoming. All parties concerned appear to want to be seen to be doing something, even if it is not effective.

Recently, I experienced first hand the anti-fraud measures some banks have put in place. While travelling abroad to the US I found that I was unable to use my Maestro/Switch debit card facility to top up my pay-as-you-go telephone, although i was able to withdraw money from ATMs.

Upon my return to the UK still finding I had problems using the Maestro facility, I rung my bank upon which they informed me that they had identified some "unusual" activity on my bank account and had barred the Maestro facility.

The "unusual" activity turned out to be cash withdrawals I had made from ATMs in the US and a switch payment to my UK internet provider. According to the bank's anti-fraud department its "automated" anti-fraud system, which had just been updated, flagged the transactions based on the logic of how can someone be withdrawing money in the US while a Maestro payment on their card is being made in the UK?

Well the Maestro ISP payment comes out of my account every month and if they had bothered to check they would have seen a record of that, but as the anti-fraud officer I spoke to told me, automated anti-fraud solutions do not provide that level of detail, they merely flag things, which to them look unusual.

While I appreciate my bank's efforts in trying to combat card fraud, I do question the reliability of automated systems that flag everything without some form of manual verification of my transaction history and spending behaviour.

If my bank really knew their customer then they would have realised that I do make regular overseas trips and that the Maestro payment to my ISP is a regular payment made from my account.

1 comment:

Anonymous said...

I concur. KYC is perhaps just a lip service when it comes to the smaller retail client. While perhaps we don't transfer or remit large sums of cash like our corporate "counterparts" banks will not find time to understand the spending behaviour of its retail clients. That said, automation of transactions in term of AML monitoring should not really be a problem for banks because if they have no time in analysing the financial history of its clients then what we can deduce from all this is that AML features are not so much in place to protect clients but merely to protect the bank's interest in having to compensate the client.