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Norkom announces industry breakthrough in the management of global compliance and fraud screening

2009-09-09 18:21
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Norkom Watch List Smart Update redefines intelligent client risk management by reducing costly false positives in detection of financial crime

BOSTON--(BUSINESS WIRE)--Norkom Technologies today announced the launch of Norkom Watch List Smart Update, a completely new analytic process that drives down false positive rates in the detection of financial crime, resulting in significant cost and time savings for leading financial institutions without increasing the risks of missing an important match.

Tested against over 200 actual regulatory lists and a range of global sanctions and Politically Exposed Persons (PEP) lists, spanning a six year period from 2004 to 2009, Norkom found that with Smart Update financial institutions can reduce match and alert volumes consistently by between 20–40% without risking any reduction in match quality. This means a

  • 50-90% reduction in daily update processing,
  • 20-40% decrease in daily investigation effort,
  • 20-40% reduction in daily false positives with no additional false negatives.

The next generation of Norkom’s innovative List Fingerprinting technology, Norkom Smart Update monitors every single change in information provided in a watch list update or even potentially client data, cleverly reducing investigation effort without sacrificing match quality. It also eliminates the need for a financial institution to build large exclusion lists or ‘whitelists’, reducing investigator effort and minimizing the threat that a high-risk individual could be removed from the screening process by accident.

False positive rates remain a major area of concern for most financial institutions. The higher the false positive rate, the more time that is lost investigating each and every prioritized alert, which leads to escalating costs and increasing levels of frustration within investigative teams. In a recent Norkom study of global financial institutions, the results of which will be released in the coming weeks, findings indicate that, while financial institutions are making a concerted effort to reduce false positives, the majority report false positive rates of greater than 97%. This is in stark contrast to the 20% of respondents who desire a false positive ratio of 1 in 5, and a further 20% who aim for a ratio of between 1 in 5 and 1 in 10.

Traditional approaches to managing alert volumes use algorithm ‘thresholds’ in an attempt to reduce match volumes, which conversely increases the risk of missing important matches. More recent trends that classify matching records via a risk-based approach improve the situation but still leave residual risks. Norkom’s new approach is a breakthrough in the management of global Sanctions and PEP compliance for both client and transaction data.

According to Edward Doyle, Norkom’s Global Head of Payment Solutions, “We modelled the operation of a compliance investigation function over the last six years and successfully identified which list change patterns drove downstream investigation and which did not. By leveraging this information, we have created an approach which consistently removes between 20-40% of the human effort and between 50-90% of system processing involved in Watch List Management.”

“These are particularly strong results given that PEP lists, comprised of hundreds of thousands of records, have grown on average by over 300% between 2004 and 2009, with 40% of total content continuing to change year-on-year,” adds Doyle. “The results can be even more dramatic in the fraud arena where fraud hot-lists are often comprised of many millions of records. Norkom Smart Update presents a radically new way to work smarter with larger volumes of data in both compliance and fraud applications. When we consider that Norkom is used to screening over a billion financial relationships on a daily basis, this is a major step forward in efficiency and effectiveness,” he concludes.

Norkom Smart Update works with lists in Arabic and Korean scripts and a variety of Japanese and Chinese scripts, making it a truly global innovation. The benefits of Norkom Watch List Smart Update are cumulative and in addition to Norkom’s other industry-leading technologies designed to combat false positives. Norkom’s Watch List Management solutions are in place at over 50 financial institutions across 100 countries and four continents.

Norkom Technologies (www.norkom.com)

Norkom Technologies (AIM: NORK.L, IEX: NORK.IE) enables financial organizations to take intelligent action, control defenses, and evolve strategies against fraud, money laundering, and other types of financial crime. Norkom has established a solid track record of reducing financial losses, protecting users’ reputations, improving operational efficiencies and lowering the cost of information technology.

Contacts

Norkom Technologies
Fiona McLoughlin, +35318739612
Marketing Manager
fiona.mcloughlin@norkom.com