Banks Scrutinize Even Routine Transactions

Federal investigators have been looking into money transfers made by New York Gov. Eliot Spitzer, who's been tied to a prostitution ring. Bank officials noticed frequent cash transfers from several accounts and it triggered a money laundering investigation. Banks use software to spot patterns in routine transactions.

Copyright © 2008 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

RENEE MONTAGNE, host:

It's MORNING EDITION from NPR News. I'm Renee Montagne.

STEVE INSKEEP, host:

And I'm Steve Inskeep.

Eliot Spitzer is still the governor of New York this morning. Spitzer is accused of being a customer of a prostitution ring. He has not yet responded to calls for his resignation, and that gives us a moment to consider how Spitzer was caught and what it means for everybody else.

His activity came to the attention to prosecutors because of what they regarded as suspicious movements of his money. The Associated Press says Spitzer may have spent up to $80,000. But it turns out you do not have to spend that much money to attract attention. NPR's Adam Davidson investigates with debit card in hand.

ADAM DAVIDSON: I thought the rules were simple. Any bank transaction over $10,000 is reported to the government. Anything less than ten grand is ignored. Turns out I was wrong. Banks monitor even the most mundane transactions.

Ms. KARIM UEKLAH(ph) (Actimize): Should we go to Speedy's.

DAVIDSON: Right here on the corner.

Ms. UEKLAH: Right here on the corner, yeah. It's our local deli.

DAVIDSON: Karim Ueklah is my guide. She's with Actimize, a company that makes the software many banks use to identify suspicious transactions. She says banks monitor every transaction, every one, no matter how small. I decided to use my ATM debit card to buy a Diet Coke and a fruit salad.

Ms. UEKLAH: Actually, I wouldn't recommend the fruit salad.

(Soundbite of laughter)

DAVIDSON: Really?

Ms. UEKLAH: Really.

(Soundbite of laughter)

DAVIDSON: The fruit salad isn't that fresh, so I bought the Diet Coke and a chocolate croissant.

Unidentified Woman (Cashier): That's it?

DAVIDSON: That's it. So this is as routine a transaction as it gets. What's happening right now?

Ms. UEKLAH: So your transaction's going through the various systems with the bank and it will get loaded into our transaction monitoring system. And we will actually add this transaction together with several other types of transactions that you've done recently.

DAVIDSON: The software is checking to see if maybe that four dollars is part of a pattern. If I'm making lots of small transactions at different delis around town...

Ms. UEKLAH: Then you will see it was an excessive activity, even if it's across many transactions. But that would be a lot of restaurants.

DAVIDSON: This is exactly the kind of thing money launderers do. They break big transactions into lots of smaller, innocent-looking ones. Ueklah invited me up to her office to see the reports the software produces. The report goes to a bank's compliance officer listing all recent suspicious transactions. Every transaction is given a numerical score.

Ms. UEKLAH: The score comes between zero and 100 and it determines how risky that suspicious activity that was detected.

DAVIDSON: The computer scores risk based on who is making the transaction. Where does he come from, who is he associated with, what else is he up to? Every bank customer has somewhere in some computer database a risk assessment score. Ueklah's boss at Actimize, Edo Ofear(ph), explains.

Mr. EDO OFEAR (Actimize): Immediately upon opening an account, the bank will look at all your characteristics, starting from your credit score to where you live to how much money you make.

DAVIDSON: The bank uses all this data to create your personal risk profile. It also checks a bunch of lists: are you on a terror watch list, a list of criminals?

Mr. OFEAR: Most banks today will also look up the PEP list, the Politically Exposed People list.

DAVIDSON: PEP list.

Mr. OFEAR: PEP list, yes.

DAVIDSON: A PEP - banks really do use that term - is anybody with political power. That means a Nigerian general, a U.S. senator, or, say, the governor of New York. And any PEP, any politically exposed person, is monitored more carefully.

If Governor Spitzer wasn't a PEP, if he was a regular schmoe, his large cash withdrawals would have had a lower risk score. They might have been ignored. He also would have been safe just a few years ago.

Mr. OFEAR: It is improbable that anyone would have detected something like that ten years ago.

DAVIDSON: 9/11 and the Patriot Act forced banks to more carefully monitor suspicious activity. But something else happened in 2001 that made banks invest in monitoring software.

Mr. OFEAR: The New York attorney general office started going after Wall Street firms and requiring them to put more surveillance on the operating behaviors.

DAVIDSON: And who was the New York attorney general?

Mr. OFEAR: I think that...

(Soundbite of laughter)

DAVIDSON: I'm not sure why Ofear didn't want to say, but of course the New York attorney general in 2001 was Eliot Spitzer. I might not have known about how this bank surveillance works, but if anybody should have, it's him.

Adam Davidson, NPR News, New York.

Copyright © 2008 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.