Tech must detect "fuzzy matches" too

Kripa Raman

April 28

What happened to all the hi-tech systems in the banks? Why could they not send out alerts when scores of demat accounts were opened bearing the same addresses but different names?

Well, it appears their technology is not quite so cutting-edge in this respect. "Exact matches can be detected, but when the names and addresses are slightly changed, the system does not sound an alert when actually it should," admitted a senior officer in charge of technology at one of the banks that has been banned by SEBI from issuing new demat accounts.

That such banks as HDFC Bank and IDBI Bank have managed to get dubious multiple account holders on their demat lists, and that other "technology-savvy" banks are facing investigations for unusually large numbers of multiple demat accounts does raise questions about their information technology systems.

Since benami registrations were rampant in the manual system, Indian depository participants should have anticipated it and provided for it in their systems, said banking software professionals.

Benami a/cs undetected

"Many technologies are simply written systems which are not geared towards looking for a benami investor," said Mr Suheim Sheikh, Chairman and Managing Director of SDG Software Technologies (recently acquired by 3i Infotech), which has developed anti-money laundering and capital market surveillance systems.

"Any technology ought to detect "fuzzy matches" too that is, when addresses and names slightly differ or are unusually similar. A proper Know Your Customer system will also map customer details against terrorist lists, criminal lists, CBI published lists, and so on," said Mr Sheikh.

If multiple applications for an IPO came from the same investor holding demat accounts with different depository participants, then the registrar to the issue could be held responsible.

But when the same investor applies from different demat accounts with the same DP, it is positively brazen and speaks very badly for the DP's systems and surveillance, says a security expert at one of the country's largest banking software outfits.

Not just system failure

If the benami incidence in demat accounts was big, the benami incidence in bank accounts in India is even bigger, say banking software professionals.

"One is allowed to have multiple bank accounts... one can have an account for rent, another for children, another for investments, and so on. But as a bank I must satisfy myself that they are genuine accounts," says the banking security expert.

Nevertheless, human alertness could still have made good the deficiencies of any system, feel banking security experts, said.

(This article was published in the Business Line print edition dated April 29, 2006)
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