Housekeeping Agenda Introduction Amy Bell OPBAS findings - - PowerPoint PPT Presentation

Housekeeping

Agenda

• Introduction
• Amy Bell

○ OPBAS findings ○ Common Issues for Law Firms ○ Evidencing a Risk Based Approach

• Steve Elliot

○ Cost of Compliance ○ Identification Examples ○ Learning from other sectors

• Audience Q&A
• End

Amy Bell Legal Industry Advisor | Encompass Compliance consultant and advisor to Encompass, current member and former chair of The Law Society’s Money Laundering Task Force.

OPBAS findings

OPBAS Report – looks good on paper

• An improvement in the application of the risk based approach by the PBS – expect more

information collection

• More PBS are conducting risk based activities, including utilising site visits as part of their

activities – expect visits as soon as appropriate, in the meantime more desk based supervision

• Increase in enforcement activity – expect non compliance to lead to disciplinary consequences

What common issues do we see in Law Firms

Firm based risk assessment ○ Template ○ Not specific to your firm Client AND Matter risk assessments ○ Tick Box ○ Timing ○ Inconsistent completion ○ Only done once at the beginning of the client relationship

Evidencing a risk-based approach in Law Firms

Client Identification and Verification ○ Tick box ○ Minimum verification ○ Risk of fraudulent documents Understanding the risk from the source of funds and wealth ○ Policy? ○ What are they looking for? ○ How are they recording they’ve done it

Evidencing a risk-based approach in Law Firms

• If it’s not written down how do you prove you did it?
• Controls?

○ CDD obtained ○ CDD checked on each matter ○ Source of funds and wealth established ○ Money came from the source you expected and have checked

Steve Elliot Managing Director | LexisNexis Risk Solutions UK & Ireland Specialist in financial crime compliance having had responsibility for AML, Anti- Financial Crime & Security as a practitioner and within international law enforcement.

Steve Elliot – Managing Director

How the banks conduct KYC and importance

• f keeping your

AML & Anti-Fraud processes current

Firms spend twice as much on labour as on technology

Who are we? What could be used to ‘identify’ us?

The cost of compliance

UK has the second highest number of financial institutions behind the U.S. (over 2,200)

UK highest cost market, within the highest cost region. Why?

• Increasingly complex regulations
• Data privacy limitations
• Sanctions violations
• Labour costs

A primary focus for firms:

Comply with regulations

NORTH AMERICA LATAM

(Brazil, Mexico, Argentina, Chile, Colombia)

EUROPE SOUTH AFRICA APAC

(Indonesia, Malaysia, Philippines, Singapore) United States $26.4B Canada $5.1B

UK

$49.5B

Germany $47.5B France $21.0B Italy $15.8B

$31.5B $4.5B

$136.5B

$2.3B $6.1B

Organisations are spending almost twice as much on labour as they are on technology

64% 36%

Overall

63% 37% 67… 33% 60% 40%

Asset Mgmt. Banks FinTech

FUTURE FINANCIAL CRIME RISKS 2020

Labour Technology

Q19c: Roughly, what percentage your annual financial crime compliance spend would you say is related to labour/resources, technology/solutions/systems, and other?

How is compliance achieved?

Risk based identity authentication tools:

• Know Your Customer (KYC)
• Name, Address, DoB, Nationality, etc
• Source of Funds (SoF) / Source of Wealth (SoW)
• Ongoing monitoring

Senior Management responsibility:

• Employee Training
• Reporting
• Record keeping

Significant continuing challenges:

1. Building the risk categories 2. Ultimate Beneficial Owners (UBO) 3. Screening (list matching) 4. Monitoring reliance on ‘rules’ 5. Data quality 6. False Positives 7. Identifying ‘suspicion’

Buyers

Advice

Wants + Needs

Product Providers

Customers

Bank Fun d Insure r Advisors

Network

Platform

Life Assurance Pension Investments Mortgage General Insurance

Products

Identity

Who + Risk

Example: KYC completed at multiple points (Wealth)

How clean is your data?

Your consumer database is a key business asset; regular data cleansing will retain its value, allowing you to maintain communication with your customers while helping you satisfy your obligations to data protection regulation.

Living as Stated Deceased Gone Aways

Example: Data Gaps

Rules Linking Statistical Linking

Example: Data Linking

Forename:

Sarah

Surname:

Jones

Postcode:

IV1 2CC

Date of Birth:

17/04/1974

Telephone:

012 4455 6677

Forename:

Sarah

Surname:

Barker

Postcode:

AB1 1BB

Date of Birth:

17/04/1974

Telephone:

012 3344 5566

Record 1 Record 2

Two individuals that happen to share the same common name and date of birth could be incorrectly identified as the same person This method can work well but isn’t perfect…

John Smith Aberdeen 22/03/1980 John Smith Plymouth 22/03/1980

Rules Linking: Are they the same person?

Forename:

Sarah

Surname:

Jones

Postcode:

IV1 2CC

Date of Birth:

17/04/1974

Telephone: Forename:

Sarah

Surname:

Barker

Postcode:

AB1 1BB

Date of Birth:

17/04/1974

Telephone:

012 3344 5566

Record 1

012 4455 6677

Record 2

• 7

Weight

Surname Mismatch

Penalty applied Penalty Weight:

Moderate

5

Penalty weights are determined by the likelihood

• f a field value varying between records…

Postcode Mismatch = Low Penalty: -3 Surname Mismatch = Moderate Penalty: -7 Date of Birth Mismatch = High Penalty: -16

Statistical Linking: Are they the same person?

Product Example: Mobile authentication

Putting the identity process securely in the hands of your customer…

Learn from other sectors

UBO s Emerging Fraud / ML

Network analysis

Onboard more customers Improved customer risk profiling Improved customer experience Improved compliance Reduced costs

The future is available now