IBM Event Processing Symposium

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Enterprise Solutions for Fraud Prevention and
Regulatory Compliance
IBM Event Processing Symposium Ido Ophir, VP
Product Management
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About Actimize

• A leading provider of Fraud and Compliance
  solutions
• Regulatory Compliance
• Anti-Money Laundering
• Fraud Prevention
• Customer base includes major Banks, Broker
  Dealers, Insurance Firms, and Regulatory Bodies
• 45 customers including 8 of the top 10 financial
  institutions in the world
• Protecting over 4 trillion in assets

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Online Fraud Prevention

• Business problem Online Fraud Losses increase,
  Confidence declines
• Sample clients
• Solution Monitor transactions, detect 90 of
  fraud attempts, provide risk scores and fraud
  alerts in real-time before the money goes away
• Key features Pre-built knowledge of Bill-Pay,
  ACH, ICT, Wires, Trading, ETC Passive device
  fingerprinting, IP Geo-location and Velocity
• Benefits Best catch-rate with lowest
  false-positive rate

Actimize combines Technology with Industry
Knowledge
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Trading Compliance

• Business problem Ensuring regulatory compliance
  of trading activity
• Sample client
• Solution A library of detection models, split
  into Equity, Fixed-Income, Derivatives and
  Control-Room Designed by Actimize Compliance
  Users Advisory Group, ensuring regulatory
  compliance
• Key features Library addressing nearly 200
  regulatory issues, Case-Manager tailored to
  compliance environment, Data requirements
  flexibility
• Benefits Be in compliance Quicker to implement

Actimize combines Technology with Industry
Knowledge
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Anti-money Laundering Compliance

• Business problem US Patriot Act KYC, Monitoring
  and reporting requirements
• Sample client
• Solution A comprehensive AML monitoring and
  reporting solution for Broker/Dealers, Insurance
  companies and Banks
• Key features Link Analysis, Behavior-profiles,
  Peer-Groups, Filtering GOVT. Lists, Investigating
  transactions, Filing regulatory reports
• Benefits Regulator reviewed Quick to implement
  Easy to customize

Actimize combines Technology with Industry
Knowledge
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Identifying a new CEP-based solution

• In todays environment the actions of employees
  are coming under an unprecedented amount of
  scrutiny. Recent cases demonstrate that
  particular attention has been focused on
• Public Companies
• Mutual Fund Companies
• Investment Advisors
• Brokerage Houses
• Banks
• Insurance Companies

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Employee Trade Compliance

• An Employee Trades Solution provides Employers
  with the necessary tools for overseeing and
  monitoring conduct in order to comply with rules
  such as
• SEC Regulation 270.17j-1
• NASD Rule 2110
• Sarbanes-Oxley
• Internal Policies and Procedures
• Code of Ethics
• It provides a robust mechanism for identifying
  and curtailing illegal employee trading actions,
  and provides managers with state-of-the-art tools
  to ensure proper supervision of employee trading
  data, helping institutions to mitigate both
  financial risk and reputational risk.

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Employee Trade Compliance Alerts

• Front Running-Research Reports
• Front Running- Large Blocks
• Front Running- Market Impact Events
• Insider Trading-Restricted List
• Insider Trading- Portfolio Positions
• Holding Periods
• Trading for Short Term Profits
• Black Out Periods
• Excessive Trading
• Short Selling
• Trading in Covered Securities
• Trading in Affiliated Securities

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Where are the employee accounts?

• Employees can hold account with any
  broker/dealer
• Industry standard is voluntary pre-clearance
• Approval is org-chart based, with many
  exclusions
• Reconciliation is expected to close the loop
• Many broker/dealers report trades via (snail)
  mail
• Large broker/dealers send files in their own
  format

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Employee Trade Management Requirements

• Automates the process of requests and approval of
  employee trading and employee certification
• Supports electronic ingestion of brokerage
  statements from outside accounts
• Reconciliation of trade approvals and executions
• Automated exception alerts and reports
• Timely management reports
• Robust sort, filter, and advanced search
  capabilities
• Complete audit trail
• Manage attestations and policy updates for review
  and signoff

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Employee Trade Requests
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Approver/PIO Review Screens
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Place of CEP in Employee Trades Compliance

• Industry focuses on pre-approval workflow
  process
• Front-end trade-entry by thousand of employees
• Managers have not intra-day attention to issues
  (too busy)
• Another focus is on taking in trade execution
  feeds
• Trade reports come in many formats and (snail)
  mail
• PS. Even when fully implemented
• Linking trading account to employer is
  trust-based ?
• No linking of friends and family is feasible ?

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Considerations when evaluating business problems

• What makes a business problem qualify for
  CEP-based solution?
• What makes CEP appropriate to solve a business
  problem?
• What if the business problem requires much more
  than CEP?

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Enterprise Solutions for Fraud Prevention and
Regulatory Compliance
THANK YOU