IT cos hope to ride on Govt's anti-money laundering wave

The Centre's focus on checking the generation and circulation of black money is expected to give a fillip to IT companies that provide software products in the anti money laundering space. While Tata Consultancy Services, 3i Infotech and Infrasoft Technologies have welcomed the broad indicators in the Budget, they feel that the need of the hour is to have firm guidelines on the use of AML products in key sectors.

“The generation and circulation of black money is an area of serious concern. To deal with this problem effectively, the Government has put into operation a five-fold strategy which consists of joining the global crusade against black money; creating an appropriate legislative framework; setting up institutions for dealing with illicit funds; developing systems for implementation; and imparting skills to the manpower for effective action,” the Finance Minister Mr Pranab Mukherjee said in his Budget speech.

Generally, AML software applications are deployed by banks and other financial institutions to profile and optimise their customer's information, verify income sources of customers and check whether there is huge divergence in income and spending patterns, said Mr Hanuman Tripathi, Managing Director of Infrasoft Technologies.

In India, banks have been the frontrunners in adopting AML software thanks to a dictum by the Reserve Bank of India. “What could happen is that the kind of compliance work happening in banks will get more focused on AML. Next generation of products will find more buyers, even among banks,” said Mr N.G. Subramanian, President of TCS' financial solutions arm.

Industry watchers feel that money laundering could be dealt with more effectively if other players in the ecosystem, such as broking companies and asset management companies, go in for AML solutions.

At present, only select institutions believe in conducting money laundering checks at their end; the reliance is on banks KYC (know your customer) and AML prowess. “An AML product is a filter that a bank uses to root out wrongdoing. However, no single filter can be foolproof. In the larger interest of compliance, it is important for brokerage firms and AMCs also to have checks at their end so that no fraudulent transaction is left unaddressed,” said Mr Amar Chintopanth, Chief Financial Officer of ICICI Bank-promoted 3i Infotech.

And unless the Government takes cues from the RBI and comes up with formal guidelines for specific industries, companies will view investments in AML products as ‘costly' and ‘unnecessary'. “We expect the surveillance department of the Central Bureau of Investigation to come up with dos and don'ts on the same shortly,” said Mr Tripathi.

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