Infrasoft eyes anti-money-laundering software market

Alarmed with reports of money from global terrorist organisations flowing into their accounts, banks across the globe are implementing special anti-money-laundering software to detect unusual flows of monies. Sensing this opportunity, Infrasoft Technologies, a specialist banking product player, is counting on its early-mover advantage to make headway in the anti-money-laundering product space that is estimated to be worth close to $10 billion. SRIKANTH R P reports

In November 2000, the chief vigilance commissioner N Vittal made a startling statement that black money accounted for more than 40 percent of India’s GDP (approximately Rs 6,750 billion or $150 billion). This statement assumes significance when you consider the issue of India’s Budget deficit, which for the year 2002 stood at 5.9 percent of our GDP. It is not India alone that faces the practice of black or unaccounted money. The International Monetary Fund (IMF) estimates the global volume of money-laundering to be anywhere between $600 billion and $1.8 trillion a year. The money-laundering operations happening through the US in 2002 was estimated at approximately $123.4 billion. To curb this problem, in October 2001, the US Congress approved the USA Patriot Act—a comprehensive set of anti-money-laundering operations. Closer home, the Indian government approved the Prevention of Money Launder ing Bill (PMLB) in July 2002. The PMLB makes it illegal to enter into a transaction related to funds derived from criminal activities or to process or transfer such funds. India’s apex bank, the Reserve Bank of India (RBI), followed this up by issuing guidelines to private and public sector banks to keep
tabs on customer accounts. Following the RBI guidelines, a few Indian banks like the State Bank of India and ICICI Bank have installed software to keep a tab on accounts.

Infrasoft’s anti-money- laundering software can do pattern detections and rule-based checks on the millions of transactions happening across the enterprise, to assist in figuring out anomalies in transactions, says Hanuman Tripathi

While the opportunity is huge, few Indian software players are poised to exploit this opportunity. But mid-sized banking software products player Infrasoft is looking to exploit the opportunity with its anti-money-laundering software. While the domestic market is still waking up to deploy anti-money-laundering software, the international market is picking up, as more and more countries introduce strict laws to combat the flow of terrorist funds.

Says Infrasoft Technologies managing director Hanuman Tripathi, "While UK was one of the first to initiate tougher laws on money-laundering, countries like Switzerland, Holland and Poland are enacting tougher laws to curb money-laundering. With retail banking expected to be a major growth area for east European banks, reputation risk due to non-compliance would be a focus area for most banks. We therefore see our AML software, OMNI Enterprise as a major growth driver for our European division. In India, once clear-cut instructions come into place, we will see more and more Indian banks going in for AML software. However, a lot of Indian banks have evinced interest in deploying our product in their branches where there are heavy cross-currency transfers involved."

Competition

While there are other global players in the AML scenario, Tripathi believes that Infrasoft has the edge because the software uses business logic to identify dubious transactions and patterns, compared to other players who use artificial intelligence algorithms to detect dubious transactions. For instance, Infrasoft’s AML software can help a bank detect a pattern between small cash deposits made in several branches of the same bank and routing transactions through these accounts. Infrasoft’s domain expertise has found takers not only among customers but also among research organisations. Recently, Celent, a leading financial research organisation ranked Infrasoft as an ‘Anti-money-laundering solutions vendor to watch’. This is significant when you consider that Infrasoft is the only Indian company to figure in the list.

Says Tripathi, "Money-laundering operations are extremely difficult to detect due to the growing complexity of financial instruments and schemes. But our software can do pattern detections and rule-based checks on the millions of transactions happening across the enterprise, to assist in figuring out anomalies in transactions. Besides this, the software can help a bank know the source of the deposit in a customer’s account and track it across different accounts."

Infrasoft has also made sure that its AML solution is compliant with country-specific laws in the USA, Singapore and Canada, in addition to other country-specific laws. For addressing the global markets, Infrasoft is in talks with consulting firms and other product vendors who want an AML component in their product suite.

Conclusion

In the current global banking products scenario, where most contracts are won by big names and size of the company has been a major influencing factor in deciding contracts, Infrasoft’s strategy of focusing on niche and untapped markets could be the way forward for mid-sized companies.