Cultivating Best Practices for Staying Ahead of Trends and - - PowerPoint PPT Presentation
Cultivating Best Practices for Staying Ahead of Trends and Developments in the Banking Industry Jean Philippe Soubry Compliance Services Director, Asia Pacific SWIFT A. THE GLOBAL PAYMENTS INITIATIVE (GPI) B. DE-RISKING: FACTS & FIGURES
Cultivating Best Practices for Staying Ahead of Trends and Developments in the Banking Industry
Jean Philippe Soubry Compliance Services Director, Asia Pacific SWIFT
A. THE GLOBAL PAYMENTS INITIATIVE (GPI) B. DE-RISKING: FACTS & FIGURES C. SWIFT FCC: WHAT’s NEW? D. KYC and CYBER SECURITY
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SWIFT gpi: secure, faster, traceable & transparent cross-border payments 1 Faster payments
Same day use of funds*
Traceable
End-to-end payment tracking
2 3 Transparent fees
Deducts and FX
4 Full remittance data
Unaltered reconciliation info
Your company Beneficiary
gpi
Intermediary bank
Beneficiary’s bank Your bank *Within the time zone of the receiving gpi member
SWIFTgpi
Rulebook
$
Invoice
a1700db1-90b2-4948-83d8-6309c5c34a3d
Singapore Business Forum - February 2017
A. THE GLOBAL PAYMENTS INITIATIVE (GPI) B. DE-RISKING: FACTS & FIGURES C. SWIFT FCC: WHAT’s NEW? D. KYC and CYBER SECURITY
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REPUTATIONAL/FINANCIAL RISKS and DE-RISKING
75% of the large global banks have reported a decline in their number of CBRs
Source: The World Bank
Some will reduce their number of CBRs by more than 50%
Source: SWIFT / ADB
75% 50%
Number of Active Correspondents
1,000 1,500 2,000 2,500 3,000 3,500 Singapore Malaysia Indonesia Thailand Vietnam Philippines Cambodia Brunei Darussalam Myanmar Laos 2014 2015 2016
+33.71%
23.5 24 24.5 25 25.5 26 26.5 27 1 2 3 4 5 6 7 8 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 APAC Active Correspondents Thousands APAC Transactions Sent Millions Transactions sent Active Correspondents
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DE-RISKING: Potential consequences
For Financial Institutions
1. Higher costs for KYC and remittances 2. Difficulty to maintain and establish new relationships 3. Loss of clients or business opportunities
For Countries
1. Lower regional integration 2. Lesser trade 3. Slower growth
“(…) processing U.S. dollar checks is now lengthier and costlier, with
IMF “ De-risking has the potential to destabilize our economies, promote financial exclusion and increase poverty levels. ” CBCS
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DE-RISKING EXPLAINED
Source: SWIFT / ADB
DE-RISKING EXPLAINED
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15.5 Billion $
fines levied on financial institutions in 2015 for violation of sanctions regulations
Global review of banking relationships both on profitability and on compliance
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DE-RISKING EXPLAINED DERISKING FACTORS: Suggested Solutions 1. COST: Reduce the cost of KYC/EDD 2. RISK: Put the right controls in place 3. TRANSPARENCY: Communicate proactively
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HOW CAN SWIFT HELP? Global utilities DERISKING FACTORS: Suggested Solutions 1. COST: Reduce the cost of KYC / EDD
KYC Registry
2. RISK: Put the right controls in place
Sanctions Screening / Testing Name Screening RMA Analysis Daily Validation Reports Compliance Analytics Etc.
3. TRANSPARENCY: Communicate proactively
KYCR Audit reports (incl. security audit)
A. THE GLOBAL PAYMENTS INITIATIVE (GPI) B. DE-RISKING: FACTS & FIGURES C. SWIFT FCC: WHAT’s NEW?
KYC Registry Sanctions Screening (NEW) Name Screening RMA Analysis (NEW) Payment Data Quality & others
NSS – Demo
KYC The KYC Registry Global depository of due diligence documents and data
SWIFT Traffic Profile Aggregated view of transaction activity with high-risk jurisdictions KYC Adverse Media Access to news and regulatory notices about (potential) customers RMA Analysis Understand which of your RMAs have been dormant or inactive, hence creating unnecessary costs and risks COMPLIANCE ANALYTICS Compliance Analytics Global view of your organization's SWIFT message traffic
payments
(NEW) Payments Data Quality Assess quality of originator and beneficiary information to comply with FATF Recommendation 16 (NEW) Daily Validation Reports Detect unusual payment flows quickly and easily SANCTIONS Sanctions Screening Transaction screening with Automatic List updates
Sanctions Testing Test, fine-tune and optimize filters and lists with third-party insurance
(NEW) Name Screening Service Screen individual names and customers, supplier and employee databases List Management Service Manage, customize and automate list data feeds
SWIFT Compliance: Top-4 priorities for LOCAL banks
A. THE GLOBAL PAYMENTS INITIATIVE (GPI) B. DE-RISKING: FACTS & FIGURES C. SWIFT FCC: WHAT’s NEW?
Sanctions Screening (NEW) Name Screening RMA Analysis (NEW) Payment Data Quality & others
PROBLEM: The cost of KYC & EDD is too high
Maintaining existing relationships is time-consuming, risky and costly DUPLICATED NON-STANDARDIZED INACCURATE TIME-CONSUMING
SOLUTION: SWIFT KYC Registry
DUPLICATED NON-STANDARDIZED INACCURATE TIME-CONSUMING CENTRALIZED STANDARDIZED VALIDATED EFFICIENT
Standardised baseline Up-to-date information Data verification by SWIFT Cooperative business model Secure, user-control access
More than 3,500 financial institutions
1,800+ in Europe, Middle East and Africa 1,000+ in Asia Pacific 600+ in the Americas 200+ countries and territories worldwide C:\Users\jsoubry\Desktop\KYCR\Counterparty coverage by region 2017 v1.xlsb
Launched in December 2014 in collaboration with Bank of America Merrill Lynch, Barclays, Citi, Commerzbank, Deutsche Bank, Erste Group Bank AG, HSBC, ING, J.P.Morgan, Raiffeisen Bank International AG, Societe Generale, and Standard Chartered Bank.
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SWIFT KYC Registry, the new global standard
434
100 200 300 400 500 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec New APAC Users in 2016…
1456
200 400 600 800 1000 1200 1400 1600 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec New Global Users in 2016 (Accumulative)
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"The KYC Registry will be a key differentiator in ensuring the correspondent banking industry increases the accuracy and efficiency around its KYC process. This is not a 'nice to have' but rather an imperative (…)” Standard Chartered
C:\Users\jsoubry\Desktop\KYCR\KYCR Baseline & SWIFT Support.pdf
"Data collection times in many cases have been reduced from days or weeks to a few hours" Unicredit “(…) Converse Bank positions itself as a more transparent, trustworthy and reliable business partner in its relations with existing and potential correspondent banks." Converse Bank
A. THE GLOBAL PAYMENTS INITIATIVE (GPI) B. DE-RISKING: FACTS & FIGURES C. SWIFT FCC: WHAT’s NEW?
KYC Registry
(NEW) Name Screening RMA Analysis (NEW) Payment Data Quality & others
CHEATSHEET: Why manual checks are not enough
Example: SWIFT sanctions lists have been updated 360 times last year => Manual updates have to be done everyday
Example: Sanction lists also include legal entities, addresses, passport number, countries etc. => screening name is not enough
Example: There are 112 spelling variations in Muammar Kaddafi’s name in print media (see table below) OFAC list provides 8 of them, the UN sanction uses only 1 => Manual screening will only stop 9 out of 112
Qaddafi, Muammar Kaddafi, Muamar Muamar Al-Kaddafi Mu'ammar Qadafi Moammar Khadaffy Muammer Gadaffi Al-Gathafi, Muammar Kaddafi, Muammar Muamar Kaddafi Muammar Qaddafi Moammar Khaddafi Muammer Gaddafi al-Qadhafi, Muammar Kadhafi, Moammar Muamer Gadafi Muammar Qadhafi Moammar el Gadhafi Mummar Gaddafi Al Qathafi, Mu'ammar Kadhafi, Mouammar Muammar Al-Gathafi Mu'ammar Qadhdhafi Moammer Gaddafi Omar Al Qathafi Al Qathafi, Muammar Kazzafi, Moammar Muammar al-Khaddafi Muammar Quathafi Mouammer al Gaddafi Omar Mouammer Al Gaddafi El Gaddafi, Moamar Khadafy, Moammar Mu'ammar al-Qadafi Qadafi, Mu'ammar Muamar Gaddafi Omar Muammar Al Ghaddafi El Kadhafi, Moammar Khaddafi, Muammar Mu'ammar al-Qaddafi Qadhafi, Muammar Muammar Al Ghaddafi Omar Muammar Al Qaddafi El Kazzafi, Moamer Moamar al-Gaddafi Muammar al-Qadhafi Qadhdhāfī, Mu`ammar Muammar Al Qaddafi Omar Muammar Al Qathafi El Qathafi, Mu'Ammar Moamar el Gaddafi Mu'ammar al-Qadhdhafi Qathafi, Mu'Ammar el Muammar Al Qaddafi Omar Muammar Gaddafi Gadafi, Muammar Moamar El Kadhafi Mu`ammar al-Qadhdhāfī Quathafi, Muammar Muammar El Qaddafi Omar Muammar Ghaddafi Gaddafi, Moamar Moamar Gaddafi Mu'ammar Al Qathafi Qudhafi, Moammar Muammar Gadaffi Omar al Ghaddafi Gadhafi, Mo'ammar Moamer El Kazzafi Muammar Al Qathafi Moamar AI Kadafi Muammar Gadafy Gathafi, Muammar Mo'ammar el-Gadhafi Muammar Gadafi Maummar Gaddafi Muammar Gaddhafi Ghadafi, Muammar Moammar El Kadhafi Muammar Gaddafi Moamar Gadhafi Muammar Gadhafi Ghaddafi, Muammar Mo'ammar Gadhafi Muammar Ghadafi Moamer Gaddafi Muammar Ghadaffi Ghaddafy, Muammar Moammar Kadhafi Muammar Ghaddafi Moamer Kadhafi Muammar Qadthafi Gheddafi, Muammar Moammar Khadafy Muammar Ghaddafy Moamma Gaddafi Muammar al Gaddafi Gheddafi, Muhammar Moammar Qudhafi Muammar Gheddafi Moammar Gaddafi Muammar el Gaddafy Kadaffi, Momar Mu`amar al-Kad'afi Muammar Kaddafi Moammar Gadhafi Muammar el Gaddafi Kad'afi, Mu`amar al- Mu'amar al-Kadafi Muammar Khaddafi Moammar Ghadafi Muammar el Qaddafi
“The Sanctions Screening service allows us to comply with the sanctions laws by blocking and flagging prohibited transactions. It is an easy-to-use solution that keeps us up-to-date and reduces the operational complexity …”
Huang Weibo, Head of International Business, Huizhou Rural Commercial Bank in China
Public Sanctions lists available on SWIFT Sanctions Screening
Public sanctions lists updated by SWIFT daily
+ Private lists & Good-guys lists
managed by the users
Country Description Australia Department of Foreign Affairs and Trade (DFAT) DFAT Iran Specified Entities List DFAT Country List Canada Office of the Superintendent of F.I. (OFSI) OSFI - United Nations Act Sanctions Department of Foreign Affairs and Trade (DFAIT) DFAIT Countries Embargoes European Union European Official Journal EU Countries Embargoes EU Ukraine Restrictive Measures France Journal Officiel français Hong Kong Hong Kong Monetary Authority (HKMA) HKMA Countries Embargoes Japan Ministry of Finance Special Measures Netherlands Frozen Assets List - Dutch Government New Zealand New Zealand Police China Ministry of Public Security of the PRC Ukraine State Financial Monitoring Service of Ukraine National Security and Defense Council (NSDC) Country Description Norway Ministry of Foreign Affairs (MFA) list MFA United Nations list MFA Countries Embargoes Singapore Monetary Authority of Singapore - Investor Alert List Singapore Government - Terrorism (Suppression of Financing) Act Switzerland Secrétariat d'Etat à l'Economie (SECO) SECO Countries Embargoes United Kingdom Her Majesty's Treasury HMT Countries Embargoes HMT Ukraine Restrictive Measures United Nations United Nations UN Countries Embargoes United States
Financial Crimes Enforcement Network (FINCEN) OFAC Specially Designated Nationals OFAC Embargoed Countries OFAC non-Specially Designated Nationals, including:
SWIFT Sanctions Screening
Your institution Your correspondents
trades in real time (web based GUI)
SWIFT Sanctions Screening Users since launch in 2012
A. THE GLOBAL PAYMENTS INITIATIVE (GPI) B. DE-RISKING: FACTS & FIGURES C. SWIFT FCC: WHAT’s NEW?
KYC Registry Sanctions Screening
RMA Analysis (NEW) Payment Data Quality & others
SWIFT Name Screening: Reduce your Risk Profile
1. New client screening: Online screening 2. Periodic reviews: Batch Name screening 3. Real-time updates: API
NSS – Demo
PEP Lists SOR Lists Sanctions Lists Private Lists Adverse Media
SLD Bespoke by Institution
Public Sanctions Lists provided by SWIFTs List
been cleansed, standardised and enriched with BIC and ISO country codes. They are updated on a daily basis. Providing institutions with an easily manageable list scope. Using Dow Jones world- class global Politically Exposed Persons (PEP) lists Customers can segment categories to screen against. Both domestic and international lists Focuses on PEPs, and relatives and close associates (RCAs) who could pose a risk. Sanctions Ownership Research covers associated entities of sanctioned individuals from all jurisdictions on EU and OFAC lists if they;
Directors
interest Sourced by DJ’s specialist research team Institutions have the flexibility to upload their
screened This also includes local lists that are not publicly available (e.g MAS lists that are only provided directly to SGP institutions) Powered by Dow Jones Adverse Media lists Benefitting from DJs specialist research teams with vast language skills 4 categories can be filtered – Regulatory, Financial, Environmental and Social
Mandatory Report Mandatory EDD Sanctions EDD AML Policy (Optional) Risk Based Approach
March 2017 Q3 2017
How do you use NSS Online?
Enter Entity Decision Workflow Results & Audit
Review Sanctions and PEP alerts Decision workflows based
2 eye or 4 eye Checks
Investigate Entity
Fuzzy matching and other advanced alerting techniques generate a match based on:
NSS – Demo
A. THE GLOBAL PAYMENTS INITIATIVE (GPI) B. DE-RISKING: FACTS & FIGURES C. SWIFT FCC: WHAT’s NEW?
KYC Registry Sanctions Screening (NEW) Name Screening
(NEW) Payment Data Quality & others
RMA analysis and review 33
What is RMA
RMA (Relationship Management Application) is a SWIFT mechanism to control the traffic you want to accept from your correspondents and vice-versa
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Why is it important to review your RMA relationships? Wolfsberg Guidance on SWIFT Relationship Management Application (RMA) Due Diligence (Jul 2016) - extracts
Why is it important to review your RMA relationships?
Dormant relations with APAC BICs
Of total number of outstanding RMA relations is dormant on average
RMA Analysis: Process
Traffic No Yes
Not in recent 12 months In recent 12 months
Unused Dormant Active
A. THE GLOBAL PAYMENTS INITIATIVE (GPI) B. DE-RISKING: FACTS & FIGURES C. SWIFT FCC: WHAT’s NEW?
KYC Registry Sanctions Screening (NEW) Name Screening RMA Analysis
Other Compliance Solutions to Reduce your Compliance and Reputational Risk
transfers and related financial messages
A. THE GLOBAL PAYMENTS INITIATIVE (GPI) B. DE-RISKING: FACTS & FIGURES C. SWIFT FCC: WHAT’s NEW?
D. KYC and CYBER SECURITY
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Payment fraud prevention and detection – What we know
Challenges are:
Attackers are organised, sophisticated and well funded Modus operandi
CSP | Overview
You Your Counterparts Your Community
Secure and Protect Share and Prepare Prevent and Detect
Customer Security Programme
“There are only two types of companies: those that have been hacked and those that will be hacked”
Robert S. Mueller, III, Director FBI
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Internal Security Audit as part of KYC? Daily Validation Reports
SWIFT DVR USAGE
Validate you daily inbound or outbound traffic Focus your investigation and quickly identify anomalies
Daily Validation Reports – CSP – Transaction Pattern Detection – Nov 2016
Validates your daily traffic High variation in traffic compared to average – does not match records! Currency report
SWIFT DVR USAGE
Validate you daily inbound or outbound traffic Focus your investigation and quickly identify anomalies
Daily Validation Reports – CSP – Transaction Pattern Detection – Nov 2016
Identify suspicious transactions & focus your investigation Uncharacteristic high value or high volume transactions Counterparties
Daily Validation Reports – CSP – Transaction Pattern Detection – Nov 2016
Quickly identify new payment flow combination New payment flow not seen in the last 24 months New Counterparties
Daily Validation Reports – CSP – Transaction Pattern Detection – Nov 2016
CHEATSHEET: How DVR can help identify fraud – A fictitious scenario Attackers gain access to the back office systems of Bank X and send fraudulent payments. A total of $150M in fraud is sent from Bank X to accounts in Bank Y ($100M) and Bank Z ($50M). Statements are intercepted by malware in Bank X’s environment – payment records are wrong! Payments to Bank Y are uncharacteristic, values are usually lower! There have been no previous payments to Bank Z
Bank X Bank A Bank Y Bank B Bank Z
11 fraudulent payments totalling $150M 1 fraudulent payment
10 fraudulent payments totalling $100M
Identifies new counterparties Validates activity Highlights unusual payments 1 2 3 1 2 3
DVR Benefits
Validates
Back-office
Detects
Incident response with
institution traffic
internal systems
usual
relationships
recovery A simple, secure way to validate your SWIFT transaction activity and understand your payment risks
Secures
Data protection with
access
Daily Validation Reports – CSP – Transaction Pattern Detection – Nov 2016
HOW TO TURN COMPLIANCE INTO A COMPETITIVE ADVANTAGE?
HOW SWIFT HELPS TURN COMPLIANCE INTO A COMPETITIVE ADVANTAGE: Conclusion
REDUCE YOUR COMPLIANCE COSTS REDUCE YOUR RISK PROFILE & IMPROVE RISK MONITORING COMMUNICATE TRANSPARENTLY