SAS Offers Solutions as Insurance Industry Begins Dealing with AML Issues

Leaders in the insurance industry gathered recently in New York for a conference on anti-money laundering (AML) compliance sponsored by SAS. AML is new territory for most insurance companies and presents an opportunity to help combat terrorism as well as strengthen the overall industry. The insurance industry operated largely without AML tracking policies and procedures until after 9/11, but the USA PATRIOT Act changed the way all financial service companies conduct business. Regulations issued by the Treasury Department through the Financial Crimes Enforcement Network (FinCEN) now require insurance companies to implement anti-money laundering programs and to report suspicious transactions.

“AML is not going away. All financial institutions, including those involved in the insurance industry, are required to deal with this issue and to be diligent in keeping track of transactional activities,” said Jody Porrazzo, Ph.D., innovator and thought leader in the risk management community. “You have to be very proactive. You can’t be reactive. There’s too much risk. There’s too much at stake. This is a global safety issue but also a challenge to stay competitive in a new economic environment.”

New regulations open the door for better business practices
The insurance industry is now dealing with issues that banking addressed a couple of decades back. Information sharing, which has not been a top priority for insurance professionals, is now becoming a business essential. Companies must open the information floodgates within their organizations and to best meet safety standards and to optimize operations for the future.

In addition to pinpointing money-laundering patterns, monitoring accounts cuts down on other types of fraud. “We’re talking about billions of dollars industrywide,” said Porrazzo. “This is a chance to deal with multiple issues and to strengthen the insurance services industry as a whole.”

With more and better data, agents can also plan for and meet the needs of customers. The marketing potential is unlimited; however, the first step in the process is to collect, organize and understand how to use available information.

“It’s important to look at customer behavior across multiple product lines and across multiple channels. That’s where I see the gap,” said David Stewart, Director of AML for SAS. “Common customer identifiers are lacking in the insurance industry.”

Automated data collection is the first step
The current challenge for the insurance industry is to begin collecting data and to cross-reference that information to establish a legacy system, a system that builds on the past and helps predict the future. It’s impossible to detect and evaluate patterns when various accounts within an organization are disconnected – as they are at most insurance companies today.

“What we’re seeing in the insurance industry are a lot of homegrown systems or packages,” said Stewart. “Though the USA PATRIOT Act does not require automation, it’s simply not possible to build risk profiles without processing data electronically. There’s just too much information to process using a pen and paper or even poorly developed tracking programs.”

Although some insurance companies have turned to “black box” solutions for the quick fix, the approach must be more comprehensive. Security is not a problem that can be addressed once and then allowed to drop through the cracks. Solutions today may not work tomorrow. Having control over the data input and analyses is critical.

“SAS has been doing this for a long time,” said Porrazzo. “You can go in and change the business rules or the scenarios with a point and a click. This is essential when looking at money-laundering activities and in considering other options for data utilization.”

Simply having data and being able to pull that data up is not enough. An overload of irrelevant data is not going to stop criminal activity or advance sales. Instead of tracking general patterns of customer activity, it’s important to evaluate and to program for specific results.

Information has real value when solutions offer flexibility

“We have a technique in our system at SAS that will ask you to take a thumbprint or fingerprint of that ‘bad’ customer,” said Stewart. “We can feed six months of customer activity into an algorithm and it gives you all the accounts that had similar behavior.”

Targeted tracking allows companies to look at customer accounts systematically and objectively while connecting various dots on the usage map. Links between family members and cohorts often tell a story that looking at a single insurance account or group of accounts simply does not. Integration is essential and possible only with flexible programming options.

“The idea is that you need to be able to go into your system and change the rules based on the evolution of the business or the business rules that come up under compliance,” said Porrazzo. “You also want the option to use the data in other ways that benefit the company. This is where SAS stands out. Solutions are customizable.”

SAS offers user-friendly solutions with custom options
SAS offers a suite of integrated, insurance-specific solutions called SAS® Insurance Intelligence Solutions. This family of flexible, extensible solutions includes prebuilt data models and analytical models as well as streamlined processes and techniques that speed up both implementation and results, giving you a fast track to significant ROI. Insurance companies can benefit from having the best tools to meet compliance standards and the flexibility to process information in other ways to gain a competitive advantage in the industry.