Because of the pressure being thrust upon them by anti-terror laws, banks will spend billions of dollars over the next few years on software to counter money laundering. This anti-laundering software will not only track suspicious financial transactions automatically, but it will also monitor millions of innocent ones, and it will also make it harder for people to cheat on their taxes.

Due to the stringent requirements of the USA PATRIOT Act, which was enacted after 9/11 to choke the supply of terror funds, and the clear threats of steep fines and even imprisonment of bank directors should their organizations assist in money laundering, U.S. financial institutions are very enthusiastic about having anti-money-laundering software installed.

Between 2005 and 2008, banks in the U.S. are forecast to spend close to $14 billion on anti-money-laundering software, hardware, maintenance and other compliance-related activities, according to Neil Katkov, a Tokyo-based analyst with Celent Communications.

It’s expected that both Europe and Asia are will spend over $11 billion during that period.

By 2006, 94 percent of large financial institutions in the United States will have installed anti-money-laundering, or AML, technologies, according to Celent.

Already, the U.S. is the global driver of anti-laundering software. And the number of transactions reported to government agencies, such as the Financial Crimes Enforcement Network (FinCEN), is growing fast. In 2004, U.S. banks reported over 14 million transactions to FinCEN. According to FinCEN’s annual report for 2005, that’s 600,000 reports more than in 2003. “Anti-Money Laundering (AML) software will change international banking forever,” said Suheim Sheikh of SDG Software, an Indian software firm that hopes to tap into the big new market.

"Governments across the world will have their eyes on bank customers," he added. "Since the software can monitor so many accounts, so many transactions, all kinds of people will be scrutinized, even those who in theory are just regular people. By default, not just money laundering but anything that violates the law, like tax evasion, will be hard to hide."

As a consequence of AML surveillance, banking officials have said that even citizens with no criminal intent will have to become more efficient law abiders. Small breaches of the law, or just indifference, will no longer go unnoticed.

A bank official, who requested not to be named, said "Chances are that most of the time the software will catch not a money launderer, who is always wary, but a regular person. If you got a fat birthday gift from your brother who works in the Middle East, would you like to get calls from the bank or the government asking for an explanation? In theory, that can happen."

Even small transactions may be flagged as suspicious. Funds for terrorists are known to be small, based upon the withdrawals and deposits of 9/11 terrorists. Being small does not mean being invisible.

"Any unexplained deposit will get you calls from the bank or the authorities, and you better have the correct answers," said Cherian Varghese, chairman of Union Bank of India.

Installed at a large bank that has several branches across the world, a comprehensive anti-laundering system will monitor millions of transactions every day.

A typical anti-laundering system works like this: it pulls in customer data; classifies each into varying levels of suspicion, from high risk to low; build patterns of customer behavior; and searches for anomalies within those patterns like sudden surges in funds or huge withdrawals.

The AML software will also keep a lookout for blacklisted names, or "specially designated nationals," and takes note of transactions from countries that are perceived to be hostile to the host nation.

The software will report suspect transactions and customers to bank officials, who will then forward the information to the appropriate government agency, such as the FinCEN.

"Good AML software is a very complex tool," said Hanuman Tripathi, managing director of InfraSoftTech, another Indian software vendor that is eyeing the AML market. “Its job is not to churn out data. Instead, it makes intelligent use of data.”

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