Jonny Frank and Rex Homme do a nice job of succinctly addressing why transaction monitoring is the next “must have” anti-corruption tool. As Frank and Homme point out, transaction monitoring has become essential to anti-money laundering compliance programs and is now becoming fundamental to effective anti-corruption compliance programs. At Oversight, we agree that transaction monitoring is an important component of an effective anti-corruption compliance program.
But many caution that false positives are the risk of employing transaction monitoring. When false positives are rampant, the results become too voluminous for a company to investigate on a routine basis and these un-reviewed transactions become a hunting ground for government investigators.
Whether used for anti-corruption compliance or for the detection and prevention of fraud, waste, and abuse, transaction monitoring systems have to take the same approach as human investigators. Too often, transaction monitoring systems are too simplistic; they’ll discretely test vendors to determine if they are high risk based on their relationship to politically exposed persons or based on past experiences of other companies. These systems also test for keywords to determine when high risk payments may have occurred based on descriptions such as “agent”, “facilitator”, or “consultant”. They also take into account the country in which the transaction takes place and use risk information such as the Transparency International Corruption Perception Index (CPI) score to determine the relative risk of transactions in a particular country. Each of these tests individually are interesting indicators that can be used to make determinations related to corruption risk, but will deliver scores of false positives that need to be evaluated when they are only considered individually.
When forensic investigators review transactions after the fact, they take the results of these same kinds of tests, correlate the results, and then make determinations about which transactions should have priority for a deeper analysis. These investigators are looking for the patterns that some transaction monitoring tools aren’t sophisticated enough to detect. These investigators are effectively “scoring” the results of combining test results to determine where the greatest amount of “sharp objects” exists in the proverbial haystack of transactions. Some of those sharp objects will simply be sharp pieces of straw that translate into opportunities to address fraud, waste, and abuse. But there will also be objects that are dangerous needles that equate to bribery and/or corruption risks that need to be addressed.
The most effective transaction monitoring programs are those that think in multiple dimensions like their human counterparts. These programs automatically take into account the people involved on both sides of the transactions, the businesses involved and their relative risk based on experience, what is normal for the organization and the people involved based on roles, geography, day of the week, transaction type, etc. The best transaction monitoring programs automatically correlate and score all of this information so that the human resources can focus on the highest risk entities and take actions accordingly. So yes, while not previously possible, transaction monitoring with “human level” intelligence to detect patterns of abuse does exist.
Our product is an example of a transaction monitoring powered solution that addresses bribery and corruption risks in T&E and AP data. Our customers tell us our approach, where we apply many layers of predictive analytics, results in far fewer false positives. By using this method we’re also able to increase our customer’s access to information they can then use to investigate and communicate with employees.
This allows compliance owners to increase their analysis scope to 100% without the burden of overwhelming false positives. By delivering our solutions in software as a service (SaaS) offerings, we can continuously improve and adapt our solutions across all of our customers.
