larc2013 - regulatory plenary

1 SWIFT Latin American Regional Conference - 11-12 July 2013

Jim

Wills

SWIFT

USA

Silvana

Mesquita

Mark

Samara

BTG Pactual

Brazil

OFAC

Colombia

The Evolution of Central Counterparty in Latin America and

the Need for More Oversight (Spanish)

@swiftcommunity

#LARC2013

Regulatory Plenary

OFAC Sanctions: Who, What, Where…

…and Iran and TBML too!

“Instead of being a secondary measure, as in the past, economic sanctions have become a centerpiece of national security policy.” - Washington Post 03/23/2011

Who is OFAC?

OFAC administers and enforces economic and trade sanctions against targeted:

Foreign governments

Individuals

Entities

Vessels

Practices

OFAC is Not a Bank Regulator

OFAC cannot mandate compliance

We can (and do) impose penalties for violations

We work with regulators to ensure compliance

by U.S. financial institutions

Jurisdiction – To Whom Does OFAC Apply?

• Individuals located anywhere in the world, doing business in the United States or through U.S. persons

• Corporations located anywhere in the world, doing business in the United States or through U.S. persons

• Transactions:

– Transactions by foreign persons to extent they involve the United States;

– Transactions in property of blocked person within the United States;

– In limited circumstances, transactions involving

controlled U.S.-origin goods or technology.

OFAC Terminology: Blocking v. Rejecting

BLOCKING

“Freezing” assets under U.S. jurisdiction

Across-the-board prohibitions against transfers or transactions regarding the blocked property

Title of blocked property remains with sanctioned target

REJECTING

Underlying transaction that is prohibited, but contains no “blockable” interest

U.S. person must simply refuse to process the transaction

Specially Designated Nationals (SDN) List

OFAC’s prohibited parties list

Over 6,000 individuals and

entities identified by OFAC

Individuals, entities, vessels,

banks all over the globe who are

owned, controlled by, or acting

on behalf of targeted

governments or groups

UPDATED FREQUENTLY!!

Active Sanctions Programs (23)

Sanctions Programs

Balkans Iran North Korea

Belarus Iraq Sudan

Burma Lebanon Syria

Cote d’Ivoire Liberia Somalia

Cuba Libya2 Transnational Criminal Organizations

Congo Kingpin Narcotics Yemen

Diamond Trading Narcotics Trafficking Zimbabwe

Global Terrorism NPWMD

Comprehensive Sanctions Programs

• Cuba

• Iran

• Sudan

• Syria

These countries have trade

restrictions!

Limited Sanctions Programs

• Burma

• North Korea

• Diamond

Trading

List-Based Sanctions Programs: Regimes

• Balkans

• Belarus

• Congo

• Ivory Coast

• Iraq

•Liberia

• Libya

• Zimbabwe

List-Based Sanctions Programs

• Terrorism

• Proliferation

• Narcotics

Trafficking

• Lebanon

•Yemen

• Somali Piracy

•Transnational Criminal

Organizations

Sanctions Impact Iran – OFAC designated 360+ names linked to Iran

(Weapons of mass destruction, support for terrorism, and Iran’s energy and trade).

o As a result of U.S. sanctions and outreach:

• Most foreign financial institutions have dramatically reduced their business w/ Iran.

• Those foreign financial institutions that run afoul of U.S. sanctions risk having their access to the U.S. banking system restricted or being cut off

– Pursuant to CISADA, in July 2012 Treasury identified two foreign banks:

Kunlun Bank in China // Elaf Islamic Bank in Iraq.

• Reports indicate that Iranian oil-revenues have dropped by 50%

Burma –Sanctions targeted Burmese regime’s repression of democracy.

o As Burma made progress in political reform Treasury has eased sanctions

• Sanctions no longer prohibit U.S. persons from engaging in new investment in Burma

• Sanctions no longer prohibit U.S. banks from exporting financial services to Burma

Iran Sanctions: Is there even more now??

First East Export Bank PLC

Labuan, Malasia

Vobster Shipping Company Ltd.

Malta

Cobham Shipping Company Limited

Isle of Man

Banco Internacional de Desarrollo C.A.

Caracas, Venezuela

Eleventh Ocean Administration GMBH

Hamburg, Germany

Galliot Maritime Inc.

Panama

International Safe Oil

Malasia

Hercules International Ship

Atenas, Grecia

Cylinder System LTD

Croacia

MCS Enginerring

Alemania

Kont Investment Bank

Tajikistan

Golden Resources Trading Company LLC

Dubai, UAE

One Class Properties (PTY) LTD.

Sudafrica

Overview

1. IFCA

2. E.O. 13645

AML Compliance & Onboarding Controls

July, 2013

22

Money Laundering Phases Money laundering refers to the process of concealing the source of legally, illegally, and grey area obtained monies.

Layering (means separating the illegally

obtained money from its source

through a series of financial transactions

that makes it difficult to trace the origin)

Integration (means converting

the illicit funds

into a seemingly legitimate form)

Placement (physically placing

illegally obtained money

into the financial system)

23

How to Mitigate AML Risks

Deals

With 3rd parties?

What is THIS source of funds?

Compatible with income and wealth?

Compatible with business activity?

Suspicious transactions must be reported

Corporate Governance

Knowledge constant update

AML involvement in new products and structures

Training Sessions and Communication Memos

KYC

Who is the customer?

What is the source of funds?

Are there Negative News?

PEPs?

Sanctioned?

24

High Risk Customers

PEPs (Politically Exposed Persons),

SIAPs (Sensitive Industry Affected Persons),

SCAPs (Sensitive Country Affected Persons),

Media (Persons involved in scandals and proceedings).

IDENTIFICATION

APPROVAL

MONITORING

25

Onboarding Controls

Background Checks

Documentation Review

Systems

Digital Files/ Archives

Powers/ Signatures

26

AML Compliance main attributions

High Risk Names

Approval

Monitoring

Annual Review

Transactions

Individual Limits

Monitoring

Review and Approval of

Alerts

Due Diligences

Documents verification

AML Policies review

Register on Regulators

Internal Approvals

Policies and Procedures

Annual Review

Internal Memos

Market Best Practices

Training

Basic AML (for all employees)

Account Opening

Foreign Exchange

Background Checking

Senior Management

27

Contact and Questions

E-mail to:

DL-AML-Brazil

silvana.mesquita@btgpactual.com

Silvana Mesquita – Tel . 55 11 33832536

Q&A

?

SWIFT Latin American Regional Conference - 2013 11-12 July 2013 28