A druglord coming to India can today open 100 bank accounts in the country. For six months these accounts could have been lying dormant, and then suddenly be activated.
Most Indian banks would not be any wiser as these accounts would have been spread across various banks and across the country.
At the same time, a bank manager may not be able to differentiate between a case of money laundering or a farmer's account that suddenly sees a high balance as his income depends on the crop cycle.
Banks having filters, through anti-money laundering solutions, would be able to identify such unusual transactions alerting the system against such transactions.
Unfortunately Indian banks have yet to put in place these solutions. According to solution providers, the cost of such a product varies according to the size of banking operations.
A small to medium-sized bank would need to invest $350,000. For a larger public sector bank, the likes of Bank of India or Bank of Baroda, the cost could be four times as much.
"It will be easier for public sector banks going in for core banking solutions to put in place AML software. This is against private sector banks which have over 25 systems interacting with the customer, but not necessarily interacting with each other," said a senior foreign bank official.
Internationally, AML is a $650 million worth competitive market with US majors such as Search Space and Mantas, as well as STB System of London commanding a strong presence. India's Infrasoft Technologies is also among the top 5 providers of this software.
Today Indian banks are rushing to procure AML solutions from local and global vendors.
With the Reserve Bank of India having laid down the deadline for banks to have proper systems in place by December 2005, banks on the core banking platform and those which are in the process of setting up the same will have to make sizeable investments.
Vijaya Bank is understood to have procured the AML software solution as part of the core banking solution. Similarly, Bank of India's UK operations have bought the AML solution from Infrasoft Technologies.
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