These days, every vendor from New York to L.A. offers account monitoring anti-money laundering software, but how do you know which product to choose--or whether you need any software at all? Eli's experts tell you who's hot in the market and offer tips to help you make your own tech solution decisions.

Manual compliance poses a greater risk: While account monitoring compliance solutions might not be for everyone, purchasing an automated AML solution of some sort can be a good investment, given the current regulatory focus on the Bank Secrecy Act and the large penalties regulators are imposing on your peers, says Ted Dreyer, an attorney with Wolters Kluwer Financial Services in St. Cloud, MN. In addition, "because of their concerns about needed tech resources (and hardware to support software), many institutions have opted for ASP-delivered solutions," which offer greater flexibility, he notes.

Even though you might not need a software solution immediately to monitor account activity/risk, your bank could easily grow to the extent that you need automation. "It would be difficult to argue that manual monitoring can do the job as well as an automated system," says Dreyer. This is especially true for aggregating related transactions and flagging unusual or suspicious activity. "A manual system presents a compliance risk, and that risk is likely to become less and less acceptable as the prevalence of automated systems in the industry increases," he tells Eli.

Cream of the Crop: Compliance software experts say there are currently two account monitoring products on the market that offer excellent tech support, ease of implementation and installation: GlobalVision System Inc's PATRIOT Officer and Searchspace's AML Sentinel. After roughly a full year of analysis by tech experts with the American Bankers Association, each of these systems received the ABA's endorsement for account monitoring performance. "We examine customer service and training as well as how well these products meet banks' needs for regulatory compliance. We also had banker input and input from our ABA regulatory experts about these solutions," says Lisa Schier, director of Strategic Alliances, The Corporation for American Banking, a subsidiary of the ABA.

How the Solutions Differ: GlobalVision's PATRIOT Officer is a rule-based solution that utilizes a Dynamic Multidimensional Risk-Weighted Suspicious Activities Detector to automate your risk-based BSA/AML process by monitoring, detecting, investigating and analyzing suspicious activities across all your product lines. The product aims to allow you to effectively comply with the FFIEC BSA/AML exam manual. 

Searchspace's AML Sentinel uses advanced intelligent systems technology to dynamically develop individual customer profiles; it analyzes every transaction, account and customer across all product lines and claims to be able to detect previously unknown suspicious behavior. The solution also offers accurate alerts that could yield high quality suspicious activity investigations and enhance staff efficiency. The system detects unusual, suspicious high-risk transactions through what Searchspace calls automated contextual analysis, so it monitors all transactions within the bank.

"Each solution scored extremely well; they have implementations with almost all the core systems out there--22 that I know of for sure," says Schier. Each company also has relationships with a number of the core processors, which makes these products unique. Also, since both are available in an ASP environment, they're much easier to implement, saving you time and money.

Ask Questions Before You Buy: Before you take the plunge into any account monitoring solution, ask your prospective vendor about implementation and ongoing customer service support. Find out where you call to ask questions and make sure there's 24-hour customer support. Be sure to learn what kind of training the vendor offers for you and your staff, and learn how you receive updates to the system, says Schier. Here are some other factors to consider before you buy: 

* Does the vendor have a customer support line, or is there merely a manual?

* Does the vendor possess "compliance bandwidth"? In other words, does your vendor staff experts that know the regulatory compliance background?

* Your compliance officer must maintain a comfort level with any new software solution. With PATRIOT officer and SearchSpace, Schier found that the quality of alerts generated and the risks the software identified gave supporting documentation, but the ultimate decision to take action is the compliance officer's.

Are You Sophisticated Enough? Keep in mind that your bank must have a fairly advanced tech department in order to make any account monitoring system work well.

Example: If you're a community bank which can't take account monitoring to the next level because you don't possess the right technical hardware and software, you could keep monitoring accounts manually, says John M. Robinson, III, CRP, CFE, CRCM, director of the BAI Center For Certification in St. Louis. "For the right bank, these solutions may be good, but most I've spoken to still aren't at the level of technical sophistication to go full steam with them," he says. "You have to be able to (1) pay the price for these systems and (2) be ready to take your BSA/AML department into tech," he adds.

Here's how you can make better judgments--and remain violation-free

Consider the following scenario. You suspect that your customer's check is uncollectible from the paying bank. You call the paying bank to get more information about the account and hear, "I'm sorry--we don't give out account information." Should you equate this non-verification of funds with "reasonable cause to doubt collectibility" and place a Reg CC exception hold on the account?

There is no existing guidance from the federal regulators on what to do in this situation. "Some of our compliance officers rate Reg CC as one of the toughest rules," says Debra Geister of Charlotte, NC-based ATTUS Technologies. Geister notes that Reg CC's biggest pitfall is its subjectivity. "One of the biggest challenges we hear from compliance officers is that they don't have any consistency when it comes to Reg CC because everybody is doing it differently on the frontlines," she explains.

When it comes to tackling this regulation, keep the following considerations in mind to steer free of violations.

Don't read too much into a bank's nondisclosure

If you assume that a bank's policy is to always refuse to verify funds over the phone, then all you know by nondisclosure is its policy, says managing attorney Curt Stertz with Bankers Systems, Inc.

And other experts cite privacy concerns as the reason behind the growing number of banks that refuse to verify funds. Nonverification shouldn't be a reflection on the account, according to Donald Narup, the founder of San Diego, CA-based CRA Information Services. When invoking the "reasonable cause to doubt collectibility" exception, Stertz notes that reasonableness depends on the circumstances. "You have to look at whether or not the bank has additional information about the collectibility of the check," he states. He calls relying solely on nonverification for grounds of reasonable cause a "relatively risky" move.

Your customer base could help choose your policy

Invoking the hold is ultimately the bank's call, "if that's how they choose to set their policies," says Geister. However, from a customer relations standpoint, you must be careful about your holding policies.

"Your relationship with your customer could be a factor in your exception hold policy," says Stertz. He believes that banks should implement their policies in such a way that "if they invoke the 'reasonable doubt of collectibility' exception, they can explain their reasonable doubt to their customer in a way that the customer can understand--and hopefully agree with--the bank's conclusion."

Make sure staffers interpret the reg consistently

According to an FDIC statistic, approximately 11 percent of banks audited in 1998 received Reg CC  violations. For a relatively straightforward rule, that's   a big percentage. One of the four most frequent Reg  CC violations occurred in exception holds, the FDIC study concluded. With many of these violations  happening at the teller window, how can you avoid penalties?