© targens GmbH 2018

CASE STUDY

SMARAGD ACES360

Efficient Customer Lifecycle Management in the Financial Sector:SMARAGD aces360 Business Content for SAP Business Integrity Screening

2 © targens GmbH 2018

KEY TERMS

Customer lifecycle management

Fraud detection

KYC

Realtime processing

Predictive analytics

SAP HANA

GOALS

Develop a software solution based on SAP Business Integrity Screening to:

Adhere to legal compliance regulations

Identify fraud and money laundering; perform sanctioned-party list screening and embargo checks

Reduce the implementation time for customer lifecycle management

Process large volumes of data fast and reliably

APPROACH

Software development based on SAP HANA and SAP Business Integrity Screening

Development of a custom data model and business content for SAP Business Integrity Screening

Use of text mining, predictive analysis, and rule-based approaches

RESULTS

Reliable adherence to compliance regulations

Holistic assessment of customers with 360-degree view of the customer lifecycle for compliance purposes

Comprehensive rating of new and existing customers using screening and risk lists

Targeted detection of suspicious activities with payment screening and transaction monitoring

Continuous processing of alerts as well as reporting using dedicated SAP Fiori Apps

SMARAGD ACES360 BUSINESS CONTENT – FOR TURBO-CHARGED CUSTOMER LIFECYCLE MANAGEMENT

Over the past years, the European Banking Authority, the „Deut-sche Bundesbank“ and “BaFin (the Federal Financial Supervisory Authority in Germany)“ have introduced numerous compliance regulations for the financial sector. The Minimum Requirements for the Security of Internet Payments (MaSI), the Payment Service Directive 2 (PSD 2), and the 3rd and 4th EU Anti-Money Laundering Directives – to name just a few examples – define, among other things, the obligations of financial institutions in providing pay-ment services and are designed to safeguard the entire banking system.

At the same time, they pose major challenges for financial insti-tutions. For example, customer data that is required to assess risk and detect fraud is often stored in different IT applications and needs to be consolidated and evaluated. Customer lifecycle ma-nagement therefore plays a decisive role in compliance. Imple-menting such a system and defining the relevant business rules costs banks valuable time – time in which compliance can’t be reliably ensured.

targens GmbH has been advising companies in the financial in-dustry for more than 30 years. As experts in banking, compliance, and digital finance, the company has also supervised many cus-tomer lifecycle management implementations. And now, targens has channeled its substantial business knowledge into its own software solution: SMARAGD aces360.

The solution is based on SAP Business Integrity Screening (BIS) and enables customer lifecycle management to be implemented fast at financial institutions. SAP was an adviser and partner during the solution’s development. Mayato GmbH worked with targens to implement the content in the software on the basis of SAP HANA.

THE GOAL – RISK REDUCTION

If regulatory requirements aren’t observed, the consequences can be serious, not only for the financial institutions. Employees are also in danger of being prosecuted by the authorities. The risks must not be underestimated:

Damage to reputation through undetected cases of fraud

financial damage by defrauders, money laundering, and so on

Financial penalties imposed by the regulatory authorities

Personal liability of anti-money laundering officers and executive board members

MANAGEMENT SUMMARY

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Introducing a comprehensive software solution to meet regulatory requirements protects companies against these risks. With its governance, risk, and compliance (GRC) solutions, SAP provides a toolset to cater to the regulatory, technological, and business requirements. The toolset is divided into the categories three lines of defense, access governance, and international trade.

With the solution for the first category – SAP Business Integrity Screening (SAP BIS) – SAP provides a framework to prevent and detect irregularities and cases of fraud. SAP BIS is powered by the in-memory database SAP HANA, which means large volumes of data can be analyzed in real time. What’s more, cases of fraud can be identified more easily and more reliably with the help of the Predictive Analytics Library contained in SAP HANA.

SAP BIS also includes the SAP Fiori launchpad, an entry port through which web applications can be provided in the form of SAP Fiori apps. SAP Fiori apps can then be used, for example, to configure detection methods and detection strategies, or to handle alerts. Previously, financial institutions had to define and implement content, business rules, and algorithms for adhering to compliance regulations themselves. SMARAGD aces360 simpli-fies this step considerably, because the risk dimensions and detection strategies are predefined and only need to be adjusted to fit each specific company.

SAP BUSINESS INTEGRITY SCREENING AS THE BASIS

targens GmbH deliberately chose SAP, one of the world’s biggest software providers, for its own development project. SAP BIS was devised as a hybrid solution. Thus, part of the application content can be found in SAP HANA in the form of tables, views, stored procedures, and search models.

The logic for creating alerts, the SAP Fiori apps, and all other ele-ments are provided through a custom module in SAP AS ABAP 7.50. The user interface, web services, and general business func-tions, however, are provided through the standard solutions SAP Business Suite foundation component, SAP Gateway Foundation, and User Interface Technology, which are contained in SAP AS ABAP 7.50.

SAP HANA and SAP AS ABAP are closely dovetailed here and thus form a single unit. To structure and implement the comprehensive business processes and rules, targens drew on the knowledge of mayato GmbH in the areas of SAP HANA and SAP Business Inte-grity Screening with the aim of creating an integrated approach to customer lifecycle management from a compliance perspective. The collaboration brought business and technical expertise to-gether and facilitated innovative ideas and solutions for the com-pliance departments of financial institutions.

SAP Business Integrity Screening User Interface

SAP AS ABAP 7.50

SAP Business Integrity Screening

ACS Foundation

NetWeaver 7.50 AS ABAP

BusinessSuiteFoundation

GatewayFoundation

SAP Fiori/

HTM

L 5W

EB D

ynpro

UserInterfaceTechnology

SAP HANA

SAP Business Integrity Screening

Table ViewsStoredProcedures

SearchModels

Figure 1: SAP Business Integrity Screening

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SMARAGD ACES360 BUSINESS CONTENT AS ADDED VALUE

In the development of SMARAGD aces360, the project team fo-cused on the solution’s ease of use. The idea was for customers to be able to implement their own customer lifecycle management reliably and quickly. To achieve this, the following criteria are met:

Fast, distributed customer acceptance process

Provision of predefined business rules

Management of alerts aligned with the business process, with a clean look-and-feel

Configurable workflow for processing alerts

Comprehensive and integrated reporting for business units and management

Intuitive user interface in the SAP Fiori apps to minimize the need for training and to achieve rapid acceptance in the business units

To meet these requirements, the project team – which comprised experts from targens and mayato – developed their own data model, in addition to the SAP BIS application content. This exists parallel to the SAP BIS data model and serves to store the data supplied via the ETL process and web service. In such a way, the data is not only stored for mass detections and predictive ana-lytics, but also meets auditing requirements.

The logic for identifying irregularities and cases of fraud was implemented using SQLScript in SAP HANA, with the help of what are known as detection methods. This means the solution benefits from the high performance of in-memory processing.

What’s more, geodata and unstructured data can be integrated and predictive analytics can be used, because SAP HANA inherently provides these functionalities. All the relevant configuration parameters were implemented as variables that can be changed easily on the user interface. Consequently, detection methods can be adapted to the individual needs of each customer.

Within SMARAGD aces360, the individual detection methods were bundled to form detection strategies. Thanks to this precise customizing, it’s possible to generate alerts in certain constella-tions only. The detection strategies supplied with the SMARAGD aces360 business content cover the entire customer lifecycle and enable alerts to be detected in the following areas:

Customer risk evaluationDuring the customer onboarding process, SMARAGD aces360 supports the assessment and categorization of customers in risk levels. A regular examination of risks with existing customers informs users about any dangers they may pose.

Sanction and PEP screeningDuring and after the customer acceptance process, SMARAGD aces360 helps detect violations of sanctions (business partner screening, sanctions list screening) and identify PEPs (politically exposed persons).

Payment screeningThe Minimum Requirements for the Security of Internet Payments (MaSI) make the real-time monitoring of payments even more important. Previously, payments were tracked to detect any infringement of hard criteria, such as blacklists. Now, however, payments must also be monitored for alerts that stem from unusual customer behavior.

“SMARAGD aces360 gives a holistic assessment of the customer

for compliance purposes. But despite the comprehensive ana-

lyses and complex algorithms of customer lifecycle manage-

ment, it’s fast and efficient to use. This is largely thanks to

mayato’s sound technical implementation.”

Susanne Hofrichter, Project Lead targens GmbH

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THE ONBOARDING PROCESS AS AN EXAMPLE

Users of SMARAGD aces360 not only receive the tools for setting up customer lifecycle management, but are also given the data structure and the necessary business logic. In the onboarding process for new customers, for example, this means that there are predefined options for the entry fields such as country of ori-gin, nationality, legal form, and sector, and these are assigned a certain risk.

targens supplies users with standardized risk lists that can be individually adjusted according to the bank’s requirements. As soon as the characteristics of the individual risk dimensions have been determined for a potential customer, the software calcula-tes all the necessary compliance key figures within a very short space of time using predefined algorithms.

In the development of SMARAGD aces360, the project team placed great importance on the implementation in full of all the functionalities that enable the detection and analysis of alerts:

Real-time analysis of data

In-memory processing for high performance

Reduction of the false-positive rate through online calibration in real time

Seamless and audit-compliant documentation of the analysis

Improvements in detection rates and processing efficiency

Use of geodata, unstructured data, and predictive analytics

CUSTOMER LIFECYCLE MANAGEMENT AS AN INTEGRATED APPROACH

The subject-matter knowledge of the targens experts combined with the mayato developers’ in-depth technical understanding of the SAP HANA technology and SAP Business Integrity Screening produced a software solution that makes customer lifecycle management much simpler for financial institutions and more se- cure for compliance purposes.

SMARAGD aces360 is continuously developed and adjusted to current regulations. The financial institutions can therefore meet many of the compliance requirements for risk minimization and fraud detection within a very short space of time.

Transaction monitoring and fraudHere, the focus is on fighting money laundering, external and internal fraud, and other prosecutable actions using the risk-based approach. SMARAGD aces360 helps detect complex correlations that can be indicative of illegal undertakings and financial fraud. Methods such as predictive analytics enable a customer’s behavior to be predicted based on his or her previous activities.

Automated customer reviewStatutory deadlines and internal guidelines define when customers must be subjected to new checks. This process is automated using the automated customer review functio-nality.

Every new customer is reviewed as early as the onboarding pro-cess and the required risk assessment is performed and docu-mented meticulously. After being accepted, all the transactions are examined and alerts are reported. In addition, the law requires that thorough reviews are performed periodically. The six inspec-tion stages are therefore repeated at regular intervals.

Know YourCustomer

OngoingCDD

OnboardingCDD

ContinuousDetection

Know YourCustomer

1

1

AutomatedCustomer Review

6 Know Your Customer

Sanctions and PEP Screening

Customer Risk Evaluation

1

2

Trans- action Monitoring and Fraud

5

Sanctions and PEP Screening

2

3

Customer Risk Evaluation

3 Payment Screening

4

Figure 2: The onboarding process

© targens GmbH 2018

targens is a professional service provider for banking, compli-

ance and Digital Finance, as well as a leading provider of

consul ting, software and product solutions. Based on a profes-

sional consulting, high-performance products and the maste-

ring of disruptive technologies, the consulting and software

company supports its customers in their corporate manage-

ment, trading activities, the protection of their business pro-

cesses and the ac celerated attainment of sales activity success.

mayato specializes in business analytics. From locations across

Germany and Austria, a team of experienced process and

technology consultants works on solutions for business intel-

ligence, big data, and analytics for a wide range of application

areas and industries. Business analysts and data scientists from

mayato use these solutions to establish correlations in small

and big data and to forecast trends and events. As a member

of the Positive Thinking Company consulting group, mayato is

part of a broad international network with a diverse portfolio

of consulting and technology services. For more information,

visit: www.mayato.com.

targens – making things run mayato – watch our predictions come true

targens focuses on the fiscal and business challenges of their customers and is a leading provider of software and product solutions. 1,600 companies from all sectors in more than 50 coun-tries depend on the compliance competence when it comes to counseling and implementation projects in conjunction with the market-leading software SMARAGD.