Best Practices for Compliance p Sanction Screening Sean Norris, - - PowerPoint PPT Presentation

3rd Annual Anti Money Laundering Summit 3rd 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

Our Pedigree in Compliance solutions

The leading provider of data, software and services that allow

• rganisations to maximise efficiency and facilitate compliance
• rganisations to maximise efficiency and facilitate compliance

First to market and provider of AML screening solutions since 1993 A broader global footprint and greater expertise than any vendor in the market with over 2300 organisations using our compliance solutions The world’s experts in false positive reduction Compliance data collection and maintenance processes are Compliance data collection and maintenance processes are routinely audited for accuracy

Offices in Abu Dhabi . Boston . Chicago . Hong Kong . London . New York . San Diego . Sao Paulo . Seoul . Shanghai . Singapore . Sydney

Endorsements, Quality, and Accolades

Offices in Abu Dhabi . Boston . Chicago . Hong Kong . London . New York . San Diego . Sao Paulo . Seoul . Shanghai . Singapore . Sydney

Why do Financial Institutions need to screen?

23 October 2013

Why do we have to screen our customers?

Regulatory Requirements

RBI Banks are therefore advised to develop suitable mechanism through RBI - 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

• rganisations 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 Over the last 3 years banks have been fined over US$ 1 billions in fines 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 ti f b k i li t d i l f l t ti t ti d compensation from banks implicated in unlawful transactions to sanctioned 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

• f 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 i t ti l d h id d ft th t ill international vendors who provide good software that will 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 t ti l f ti ti d t i potential of supporting sanctioned countries 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

Shipper Use your compliance department’s watch list screening/lookup tool Sending Bank Beneficiary Bank Buyer/ Consignee Ship Used for Transport Port of Loading Port of Discharge Use a free worldwide search engine p g Discharge search engine Manually search against restricted goods lists Goods and type of goods

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

• ne tool?
• ne tool?

/ Shi Buyer/ Consignee Sending Bank Beneficiary Bank Shipper Port of Loading Port of Discharge Ship Used for Transport Use a free worldwide search engine Manually search against restricted Goods and type of goods g goods lists type of goods

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:

H d Syria Country of Sierra Leone Flag Honduras Managing Companies y Economic Benefit

IMO: 7126114 DONNA KHADIJEH STVENSLAND ? OSLOBANK ? SCOL ACTON ? OSTEBANK?

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

• f not screening appropriately

Ensure you get the best expertise when developing a i t l ith h i screening program to comply with ever-changing regulations and to obtain efficiencies without reducing the risk

Contacts Contacts

Sean Norris Sean Norris

Regional Manager – APAC Email: sean.norris@accuity.com Mobile: +65 9232 7756 Mobile: +65 9232 7756

Bharath Vellore

Key Account Manager – South Asia Email: bharath.vellore@accuity.com Mobile: +65 97233346

Offices in Abu Dhabi . Boston . Chicago . Hong Kong . London . New York . San Diego . Sao Paulo . Seoul . Shanghai . Singapore . Sydney