A survey of R&D of intelligent STR system based on behavior pattern recognition in China
| Date | 03 May 2016 |
| Pages | 109-121 |
| Published date | 03 May 2016 |
| DOI | https://doi.org/10.1108/JMLC-11-2014-0047 |
| Author | Jun Tang |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
A survey of R&D of intelligent
STR system based on behavior
pattern recognition in China
Jun Tang
Zhongnan University of Economics and Law, Wuhan, China
Abstract
Purpose – The purpose of this paper is to systematically study the research and development history
of suspicious transaction reporting (STR) system in China, and introduce the core elements in
constructing an intelligent surveillance system which could provide a solution to the situation of low
effectiveness and efciency in Chinese Financial Institutions (FIs) STR procedure nowadays. The
solution outputs those falling out of the normal customer behavior proles instead of only extracting
data by the rules issued by authorities.
Design/methodology/approach – This paper reviews the latest literature, regulations and
guidelines of STR gathered domestically and overseas, and hands out questionnaire surveys to
hundreds of software vendors, regulators and FIs, details the current situation of poor deployment of
intelligent in China and tells the difculties of subjective STR decision procedures.
Findings – Few Chinese FIs have deployed real intelligent STR systems, most are using
rule-based ltering systems conformed to the objective STR supervisory regulations. To change
the embarrassing situation, the regulators have tried to introduce self-regulatory mode which
allows the FIs to dene STR decision procedures themselves. Limited by the FIs’ ability of
information sharing and investigation scope, FIs could hardly unveil the whole schema of a money
laundering organization. The pursuant objective FIs can reach is to construct a system that could
tell what the normal customer behaviors look like and extract all those falling out of the system’s
expectations as suspicious activities.
Research limitations/implications – Only the core elements of the total intelligent STR system
are discussed, that is, what, why and how about the customer behavior pattern recognition system.
Besides this, a total solution should also use a watch list, reporting decision, cases management,
risk control, etc.
Originality/value – This paper for the rst time argues that the orientation of regulatory rules in
China has actually hindered the spreading of really effective intelligent system for these years. The
author creatively puts forward a solution to the difcult problem for FIs to spot criminal schema
directly, instead the FIs should only be required to determine whether the transactions carrying out
currently are falling within the expected behavior pattern scopes, which is under the FIs’
capabilities due to the internationally accepted obligations of “Know Your Customer”.
Keywords China, Customer behavior pattern recognition, Suspicious transaction surveillance
Paper type Literature review
1. Introduction
It is a long time pursuant objective for the regulatory authorities, nancial institutions
(FIs) and software vendors to monitor the enormous transactions 24 hours a day and
detect illicit activities automatically. Since the rst set of anti-money laundering (AML)
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1368-5201.htm
R&D of
intelligent
STR
109
Journalof Money Laundering
Control
Vol.19 No. 2, 2016
pp.109-121
©Emerald Group Publishing Limited
1368-5201
DOI 10.1108/JMLC-11-2014-0047
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