5. SWIFT Financial Crime compliance initiatives


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5. SWIFT Financial Crime compliance initiatives

  1. 1. SWIFT Financial Crime compliance initiatives Franck de Praetere Payments Markets, SWIFT Asia Pacific
  2. 2. 2 Financial Crime Compliance Roadmap FATF 16 Information quality Compliance Analytics Sanctions list Mngt service Sanctions KYC AML Processing services Traffic analysis Standards Data repositories KYC registry AML testing & tuning Sanctions Screening Sanctions Testing & tuning (transaction & client systems) Traffic restriction (RMA) Live Development Qualification Exploration Quality Assurance Client/Name screening
  3. 3. 3 More on SWIFT Sanctions Screening service
  4. 4. Your institution • Best-in-class Screening engine & user interface • Centrally hosted and operated by SWIFT • No local software installation & integration • Real-time screening of FIN messages • Sanctions List update service Sanctions Screening service Your correspondents 4
  5. 5. Sanctions Screening - headlines 5 184 customers in 80 countries Strong roadmap to develop current service • Adding more lists to support local needs • Support of any formats (ISO20022, MX, SEPA, domestic, proprietary,..) • Fine-tuning rules to optimise hit rate aligned with your risk appetite Expanding the screening portfolio • Customer screening service for client data against Sanctions, PEP, Negative media,… • Sanctions Lifeline as a disaster recovery service for your current screening infrastructure
  6. 6. 7 More on SWIFT Sanctions Testing service
  7. 7. Effectiveness • Provide assurance that your filter works • Measure system’s fuzzy matching performance • Assess coverage of sanctions lists • Align screening system to your risk appetite Efficiency • Reduce false positives through iterative testing • Build optimisation tests into your processes • Understand parameter changes • Manage and tune rules and “good- guy” lists Testing Meeting regulatory demands Tuning Managing cost and resources Sanctions compliance – balancing priorities with 8
  8. 8. Formats Settings Lists Automate • Repeat • Compare • Monitor Sanctions Testing process Define test objective Download test files Process test files Upload hit results View test results 9
  9. 9. Results Matrix Critical Misses Should Be Missed Should Be Hit Wasted Investigations
  10. 10. Graphical comparison of the filter fuzzy performance at 3 different thresholds
  11. 11. Common issues identified through testing • Outdated lists • Missing entry types • Missing entries • Language variants not screened correctly • Deleted records still screened Sanctions Lists Quality • List scope incorrect or not aligned with bank policy • Inconsistent implementation across filters • Entity and alias types screened unnecessarily Screening Policy • Inconsistent screening performance across message types • Message or file elements not screened properly • Overreliance on specific fields (e.g. address or country) Message Types • Poor fuzzy matching performance • Line break, word order, sequences • Poor performance against particular entries (short or long names, aliases) • Character set matching issues Filter Weakness 12
  12. 12. 13 More on Compliance Analytics
  13. 13. Typical areas where Compliance Analytics will bring value 14 • Enterprise risk assessment • Correspondent risk assessment Executing Risk assessments • Compare anticipatory behaviour against country standards • Periodic reviews to ensure activity is in line with anticipated risk • Event driven reviews • Retrospective reviews Customer Due Diligence • Country visits • Correspondent reviews Compliance investigations and visits • Volume reconciliation • Scenario optimisation • System tuning Transaction monitoring • Pre-calculated metrics • Key Performance/Risk indicators Metrics and dashboarding
  14. 14. 15 Leveraging country of origin and beneficiary country to provide additional insights CA UK CH YE MT103: field 52A MT202: field 52A MT103: field 57A MT202: field 58A BIC code BIC code
  15. 15. Example 1 : Country risk assessment– Mauritania What business do I have with Mauritania on a global basis? Data Sources All figures based on Inbound payments (MT103 & MT202cov) from correspondents in Mauritania – Full Year 2013 1. Geographical distribution of Demo Bank branches/affiliates, based on value of inbound traffic. Payments with 4 Demo bank affiliates in 4 countries 2. Top20 Ultimate beneficiary countries (field 57a), based on value of inbound traffic: Top 20 out of 100 countries overall 3. Sanctioned country as ultimate beneficiary, based on value of inbound traffic. Example has one payment sent by Bank X in Mauritania, via Demo Bank, with Cuba as ultimate beneficiary country Value distribution 2. Ultimate beneficiary countries – Top 20 3. Do any flows end up in a Sanctioned country? 1. How many of my branch / affiliates receive payments from Mauritania? 4 branches in 4 countries Correspondent CORSMRMR in Mauritania has sent me one payment in USD that ends up in Cuba 16
  16. 16. 17 Example 2: Specific Correspondent Risk assessment Where are payments originating from? Ending up in? 1. What are the higher risk originating countries? 2. Which of my affiliates are involved in these flows? 3. What are the ultimate beneficiary countries?
  17. 17. Example 3: Monitor correspondent relationships at group level Active / Dormant / Unused RMAs 18 1. RMAs opened in 2012 and status (active, dormant, unused) 2. Geographical distribution of new inbound relationships 3. Are these relationships in high risk jurisdictions as per FATF classification?
  18. 18. Example 4: Value range distribution by correspondent Is value distribution in line with anticipated behaviour? 19 Bank 1 Bank 2 Bank 3 Bank 4 Bank 5 Bank 6 Bank 7 1. What is the value distribution from my correspondents in Nigeria? 2. How has it evolved over time?
  19. 19. 20 More on SWIFT KYC Registry initiative
  20. 20. The Context An unprecedented challenge to comply with KYC legal requirements 21 SWIFT KYC Registry Complex and inconsistent requirements across jurisdictions Cumbersome, repetitive and inefficient bilateral exchanges Unavailability and poor quality of information Complex and inconsistent requirements across jurisdictions Cumbersome, repetitive and inefficient bilateral exchanges Unavailability and poor quality of information
  21. 21. Collection of data and documents • Structured data • Supporting documents • Maintenance • Archiving and versioning Controls • Completeness, validity, accuracy Reporting and monitoring • Platform activity reporting and practices • Audit trail • Notifications of changes Value added services • SWIFT profile 22 Inscope Outofscope Name screening • List screening (PEP, blacklist checking) • Alert management or bad press Risk scoring • SWIFT proposed risk score • Communication on (non)-accepted counterparties Due Diligence • Around intermediaries Regulatory watch and market practices • Monitoring of legal/regulatory updates What will the SWIFT KYC Registry be in its first phase
  22. 22. 23 SWIFT Profile A new way to bring more transparency on your correspondents’ activities • Objective and factual, initially based on FIN traffic • Helps validate declared behaviour • Substantiates risk rating process • Different levels of granularity up to the level of nested correspondents • Optional and shared at bank’s discretion • Specific, transparent and unambiguous • Does not contain competitive information SWIFTProfile
  23. 23. 24 SWIFT Profile – Granularity SWIFT Profile Level 3 – “Nested Correspondents” Country BIC Code Bank Name Turkey TRBATRIS Turkish Bank A TRBATRIS Turkish Bank B TRBATRIS Turkish Bank C TRBATRIS Turkish Bank D TRBATRIS Turkish Bank E TRBATRIS Turkish Bank F TRBATRIS Turkish Bank G TRBATRIS Turkish Bank H TRBATRIS Turkish Bank I Indonesia IDBAIDJX Indonesian Bank A IDBAIDJX Indonesian Bank B IDBAIDJX Indonesian Bank C IDBAIDJX Indonesian Bank D IDBAIDJX Indonesian Bank E IDBAIDJX Indonesian Bank F IDBAIDJX Indonesian Bank G IDBAIDJX Indonesian Bank H IDBAIDJX Indonesian Bank I SWIFT Profile Level 1 Does Bank A have correspondent banking activity with entities located in countries under close monitoring of the FATF? Yes No Identities of Bank A’s correspondents per concerned jurisdiction: SWIFT Profile Level 2 – “Nested Countries” Bank A’s correspondent banking traffic with concerned FATF jurisdictions. Share per country:
  24. 24. 25 January ’14 • Formal announcement of the KYC Registry initiative • Start of KYC Working Group & data contribution September ’14 • Open the Registry for data contribution by a number of selected banks December ’14 • Open the Registry for data contribution and consultation by all banks • Commercial launch of the Registry Timeline The journey starts today Bootstrap Controlled ramp-up General availability
  25. 25. Thank you 26