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Monday, Nov 23, 2009
There are profits to be made selling computer programs that snoop out money launderers and suspicious foreign students.
Apr 23, 2003 | Civil libertarians like to call the USA PATRIOT Act a Big Brother nightmare come true. But if the rush by software companies to cash in on Congress' attempt to combat terrorism is any indication, it's not the government that privacy advocates should be watching with suspicion. It's the free market.
Witness one recent marketing campaign from database company Sybase: "Compliance with the USA PATRIOT Act has never been easier, thanks to Sybase's PATRIOTcompliance Solution," reads a promotion for the company's new anti-money-laundering product on its Web site.
Title III of the USA PATRIOT Act steps up the requirements for financial institutions -- banks, insurance firms, credit card companies -- to monitor customer transactions for suspicious activity. That means new markets for companies already peddling anti-money-laundering software, known as "AML solutions."
"Although the law imposes new burdens on banks, it is proving to be a boon for vendors of AML and related products and technology," wrote Breffni McGuire, a senior analyst for TowerGroup, a financial services technology research firm, in a report titled "The USA Patriot Act: Impact on AML Vendors and the Market." She reported that vendors saw inquiries about the technology rise 200 to 300 percent in the months following Sept. 11.
Monitoring for money laundering isn't as easy as simply flagging all wire transfers over $10,000. Bob Breton, a senior director of product strategy for the e-business division of Sybase, says that the PATRIOT Act has thrown down a gauntlet to financial institutions challenging them to know their customers better, without specifying exactly how they should do that: "This is forcing institutions to think more completely about their view of a customer. What kind of business are they in? What sort of transactions do they do? Who do they do business with? Are they writing checks to unusually named charities? That's the challenge: How do you determine what is normal?"
Financial institutions are also required to check their customers against known-terrorist watch lists, which is technically harder than it sounds. One bank initially flagged 20,000 customers, according to Breton, because they all lived in a city called Binfield -- which was just a little too close for comfort to Osama bin Laden.
But while the PATRIOT Act tells banks that they must have an anti-money-laundering program, an officer responsible for it, a training program, and an audit of their system, it doesn't tell them exactly what that program should consist of. "The regulations generally tell you what you need to do at kind of a 60,000-foot level," says TowerGroup's McGuire. "But they don't tell you how you should do it. And they certainly don't tell you what technology you need."
For software companies desperately looking for new markets during an industrywide recession, the PATRIOT Act, in conjunction with DARPA's ambitious Total Information Awareness data-mining scheme, is a godsend. Financial institutions, universities and government agencies are all feeling pressure to keep a closer watch for lurking terrorists. Welcome to the digital police state, shrinkwrapped by a Silicon Valley start-up near you.
