3 rd Annual Anti Money Laundering Summit 3 rd Annual Anti Money Laundering Summit Mumbai , 23 October 2013 Best Practices for Compliance – p Sanction Screening Sean Norris, CAMS APAC Regional Manager
Objectives To stress the importance of screening as an essential part to your AML/CFT program essential part to your AML/CFT program Provide an overview of screening best practice Provide an overview of screening best practice Provide some detail on things to consider when developing an effective screening program
Agenda Introduction to Accuity Why do Financial Institutions need to screen? Best Practices for Screening Key takeaways
Introduction to Accuity 23 October 2013
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Why do Financial Institutions need to screen? 23 October 2013
Why do we have to screen our customers? Regulatory Requirements RBI RBI - Banks are, therefore, advised to develop suitable mechanism through Banks are therefore advised to develop suitable mechanism through appropriate policy framework for enhanced monitoring of accounts suspected of having terrorist links and swift identification of the transactions and making suitable reports to the Financial Intelligence Unit – India (FIU-IND) on priority UN - FI’s should monitor wires for those involving parties designated by the United Nations Security Council and take freezing actions or otherwise prohibit the transactions from occurring the transactions from occurring OFAC - Prohibit transactions and require the blocking of assets of persons and organisations that appear on one of a series of lists that OFAC issues periodically All Banks have a responsibility and obligation to screen accounts and payments against major sanctions lists to prevent Terrorist Financing
Why do we have to screen our customers? Financial Penalties Fines Fines - Over the last 3 years banks have been fined over US$ 1 billions in fines Over the last 3 years banks have been fined over US$ 1 billions in fines Share Price - Announcement’s of poor screening controls can have a significant Share Price Announcement s of poor screening controls can have a significant impact on the institutions share price Remediation - The internal cost for a bank to have independent auditors review the gaps and analysis of why payments are not being screened does cost substantially more than the fines itself Incorrect Sanctions Screening will cost the bank money in the long term without a proactive and thorough screening program in place
Trends of Fines and Penalties 2003 - 2012
Reputational Damage Trust - In a competitive market banks and FI’s cannot afford to create doubt regard its integrity in any market place Lost customers - A bank will lose customers and share holders if trust and credibility in tarnished Bad press - Creates doubt for investors and customers which will in turn affect the banks performance. Even the families and victims will look for compensation from banks implicated in unlawful transactions to sanctioned ti f b k i li t d i l f l t ti t ti d entities No News in Good News, ensure you have the correct controls in place to protect your institution from reputational damage
Best Practices for Screening 23 October 2013
Best Practice - Screening Customers and Payments What needs to be screened? New customers New customers Existing customers SWIFT M SWIFT Messages Inward NRI Remittances – Online, Foreign branches, Exchange House and other such partners Exchange House and other such partners Trade Documents – Bill of Lading, Commercial Invoice etc. The first step to ensuring an effective payment screening programme is to recognise that terrorist’s are funded through international payments
Best Practice - Screening Customers and Payments When do we do screening? New customers - Before Account Opening New customers - Before Account Opening Existing customers - Periodically to adhere to changes in the Sanction lists Outward SWIFT Messages - Before creation of MT103 Inward SWIFT Messages and NRI Remittances - Before credit Inward SWIFT Messages and NRI Remittances - Before credit of funds to beneficiary Trade Documents - Before creation of MT700 The first step to ensuring an effective payment screening programme is to recognise that terrorist’s are funded through international payments
Best Practice - Screening Customers and Payments Screening process and policy Operations - Depending on the banks international footprint Operations - Depending on the banks international footprint multiple lists may be required in the screening process to comply with specific jurisdiction requirements Policy - The bank must have a clear and documented policy and process for sanction screening across all processes. The first step to ensuring an effective payment screening programme is to recognise that terrorist’s are funded through international payments
Best Practice - Screening Customers and Payments Tools to assist with screening Independent Review - Ask a reputable company/auditor to p p p y review your current process and policy for KYC screening Filtering solutions - There are a number of leading local and international vendors who provide good software that will i t ti l d h id d ft th t ill automate screening for the banks Sanction Data - The international sanction lists such as UN EU Sanction Data The international sanction lists such as UN, EU, OFAC and HMT are changing all the time, make sure you have the correct mechanism in place to have the latest sanction data Training - Ensure the management and teams focused on screening understand the importance of this function The first step to ensuring an effective payment screening programme is to recognise that terrorist’s are funded through international payments
Best Practice - Screening Customers and Payments MT 700 – Trade Finance Vessel - OFAC requests that banks screen against Vessel data q g that can cause high rates of false positives Ports - Where is the vessel stopping along the route, is there a potential of supporting sanctioned countries t ti l f ti ti d t i Dual Use Goods - What are the goods carried by these vessels and do they pose a threat for the development of WMD and do they pose a threat for the development of WMD Front End - It is more operationally effective to screen these data elements before a MT700 is created The first step to ensuring an effective payment screening programme is to recognise that terrorist’s are funded through international payments
A trade is worth a thousand checks and often times must be done on many documents times must be done on many documents Current processes are hard to manage, filled with time wasting manual entry and there is a lack of a central audit trail
There may be many questionable parties that you have to check using many tools you have to check using many tools Use your compliance Sending Beneficiary Shipper Buyer/ department’s watch list Bank Bank Consignee screening/lookup tool Ship Used for Port of Port of Use a free worldwide Transport p Loading g Discharge Discharge search engine search engine Manually search Goods and against restricted type of goods goods lists Using many tools equates to a lack of oversight and proof • What if a particular field wasn’t checked? • What proof is there that all fields were checked properly?
What if…these checks could all be done from one tool? one tool? Shi Shipper Buyer/ / Sending Beneficiary Consignee Bank Bank Ship Used for Port of Port of Use a free worldwide Transport Loading Discharge search engine Manually search Goods and against restricted g type of goods type of goods goods lists One tool will save you time in manual entry and provide a centralised audit trail
Trade Screening requires specific sets of data, below are what to watch out for: Syria Country of y H Honduras d Sierra Leone Economic Benefit Managing Flag Companies IMO: 7126114 SCOL ACTON ? OSLOBANK ? OSTEBANK? STVENSLAND ? DONNA KHADIJEH
Key Takeaways 23 October 2013
Key Takeaways Key Takeaways Sanction screening is powerful and essential tool to Sanction screening is powerful and essential tool to combat terrorist financing Senior management has to understand the implications Senior management has to understand the implications of not screening appropriately Ensure you get the best expertise when developing a screening program to comply with ever-changing i t l ith h i regulations and to obtain efficiencies without reducing the risk
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