business intelligence for aml

Role of Business Intelligence in

Anti-Money Laundering Compliance

software implementation

2001: Enactment of Patriot Act & impact on Money Laundering Compliance

USA PATRIOT Act of 2001 delegates to Financial Crimes Enforcement Network (FinCEN) responsibility for setting requirements for financial institutions to establish:

– anti-money laundering compliance, and

– customer identification programs (in cooperation

with federal functional regulators)

FinCEN Information-Sharing RulePurpose - Encourages information sharing among financial institutions and Federal government law enforcement agencies to identify, prevent, and deter money laundering and terrorist activity.

Section 352(a) of the Patriot Act

– Amended Bank Secrecy Act to require every financial institution to establish an anti-money laundering program

• The development of internal policies, procedures, and controls;

• The designation of a compliance officer;

• An ongoing employee training program; and

• An independent audit function to test programs.

Source: http://www.nchelp.org/elibrary/Presentations/2003/2003WinterLegalAffairsMeeting/Consumer%20Privacy%20Issues.ppt

http://www.nchelp.org/elibrary/Presentations/2003/2003WinterLegalAffairsMeeting/Consumer%20Privacy%20Issues.ppt

http://www.nchelp.org/elibrary/Presentations/2003/2003WinterLegalAffairsMeeting/Consumer%20Privacy%20Issues.ppt

Objectives1. Help Business in Implementing the directives of Patriot Act, namely,

Information sharing about Bank’s clients found to have suspicious activity.

2. Investigate all the accounts of the bank’s clients and all their transactions and check for any possibility of client’s involvement in money laundering activity or terrorist funding possibility.

3. Investigate Clients accounts details from all the different divisions of bank, namely, Asset Management group, Investment Banking, Private Banking, Trading accounts.

4. To checkout best software available in the market for building Money laundering information system.

5. Standardize business processes and IT systems to create IT system for Money Laundering division, prior to creation of ML system, if not already done.

6. Use the bank’s data warehouse for Improve data integrity.7. Develop and implement change management strategy

– Transfer knowledge from team members to users– Train users in implementation of Money Laundering software as well as produce

training materials for future users and training.– Communicate with various groups before implementation building ML Information

system.

Tra

inin

g an

d A

war

ene

ss P

rogr

am

Cost of Compliance

Anti-Money Laundering Strategy

Anti-money laundering standards and procedures

Man

agem

ent

Co

mm

itmen

t Security & technology usage

Administrative and end-user policies and procedures

KYC - Data Access/Mining

Transaction Monitoring/ Tracking Processes

Business and organisationProcesses & Initiatives

Tactical short term solutions

Compliance Requirements

International, Regulatory, Industry, Third Party, Internal

AML Reporting

Risk assessment

Investment suitabilityTax etc.

Investment suitability Tax etc.

Know your customer (KYC) -Account Opening

From Reactive to Proactive approach Integrated Approach

DDA

CIS

SWIFT

MoneyMarket

transactionhub

Load to IEF

Load to IEF

Load to IEF

Data Hub

Wires

Referencedata

Posted &Deposit DetailTransactionsTDA

ExtractNormalize & Transform Load

Fortent MonitorSystems of Record

Data Pipeline

FedWire

transactions

wire transactions

customers

accounts

rel man

Concept: Fortent software training material

IEF

Excel sheet, graphs

Excel sheet, graphs

Excel sheet, graphs

Zurich office

London office

New York office

Money Laundering Data warehouse

Major Opportunities1. Bank freedom from Government fines and penalties by Complying

with the directives of Patriot Act.

1. Faster processes and ability to provide information to financial analysts and investigators of the Money Laundering division enabling bank to catch clients engaged in Money Laundering activity.

1. Enhancing Bank reputation by implementing Money Laundering directives and thereby increasing the value in eyes of its shareholders.

1. More accountability over the of bank’s operations raising shareholder confidence. Thereby, enable bank to be more prepared to face any eventualities like facing Government fines on late implementation of Compliances or avoiding law suits by the government if any of the bank’s client found to be guilty.

1. Easy access to exact numbers Suspicious Client and their transactions.

1. Faster Processes means bank would give competiting banks, financial institutions a run for their money in providing services.

Opportunities: Easy Trends analysis

Money LaunderingAnalysis using Tools

Users

WealthManagement

Investment Banking

CalculationEngine

Actuate

Actuate

Zurich office

Stamford Office

ActuateCognos

SAS

New York office

Actuate

London Office

Excel sheet, graphs

Excel sheet, graphs

Excel sheet, graphs

Excel sheet, graphs

Zurich office – Report on Clients

transactions unexplained for amount

above $10,000.

Zurich office – Report on Clients

transactions unexplained for amount

above $10,000.

Stamford officeList of clients in US said

to be under suspicion radar

Stamford officeList of clients in US said


Berlin office List of clients in Germany said


Berlin office List of clients in Germany said


New York office –US government – List of all

Clients under suspicion by bank’s investigators

New York office –US government – List of all

Clients under suspicion by bank’s investigators

Paris office– How to perform better Than Credit Suisse –

search Trends Excel, Word

Paris office– How to perform better Than Credit Suisse –

search Trends Excel, Word

London office demands Suspicious

Activity Reports

London office demands Suspicious

Activity Reports

Opportunity:Easy access of information globally

Opportunities: Actual number & not mere suspicion about Client & their

transaction

1010

4747

3030

1212

Wealth Wealth ManagementManagement

Investment Investment bankingbanking

Fixed Fixed IncomeIncome

Institutional Institutional securitiessecurities

USUS

Europ

Europ

eeAsiaAsia

3/1 3/2 3/3 3/1 3/2 3/3 3/4 3/4

DateDate

Month

Month

Reg

ion

Reg

ion

ProductProduct

Globalisation of Globalisation of clients & dataclients & data

Globalisation of Globalisation of clients & dataclients & data

Sophisticated money

launderers

Sophisticated money

launderers

Inefficient compliance

systems

Inefficient compliance

systems

Reporting to number of agencies & regulation change

Reporting to number of agencies & regulation change

Accountability of transactions from Corresponding banks, investigate volumes of data.

Accountability of transactions from Corresponding banks, investigate volumes of data.

[1] Professor S. Seshadari, IIT Professor slides on Datawarehousing. Only the diagram structure taken by Professor’s slide. The concept & content based on my understanding of Delta case.

External ProblemsExternal Problems

Privacy concern’Privacy concern’Of clientsOf clients

http://www.ibtimes.com/articles/20061006/add-nyse-electronic-trading.htm

Hire Paralegal Hire Paralegal & IT team well & IT team well versed with Patriot versed with Patriot ActAct

Hire Paralegal Hire Paralegal & IT team well & IT team well versed with Patriot versed with Patriot ActAct

AML software which is best processes and

budget?

AML software which is best processes and

budget?

Where to hire best IT, Technology consultants

Where to hire best IT, Technology consultants

Each division working on different data system

Each division working on different data system


Internal Problems Internal Problems

Massive volumes Of data &

Data integration Permissions Within

The bankDay – today operationsVs Trends & Strategy issues

http://www.baft.org/

Operational Problem:Quick access to financial information in manage transactions

What product promotions have the

biggest impact on revenue?

What product promotions have the

biggest impact on revenue?

What is the most effective

distribution channel?

What is the most effective

distribution channel?

Who are my customers

and what products are they buying?

Who are my customers

and what products are they buying?

Which are our lowest/highest

margin customers ?

Which are our lowest/highest

margin customers ?

What impact will new

products/services

have on revenue

and margins?

What impact will new

products/services

have on revenue

and margins?

Which customers

are most likely to go to the

competition ?

Which customers

are most likely to go to the

competition ?

Data Integration Problem

Current systems outdated to meet industry challenges Fragmented asset viewReporting on client's assets and related KPI not supported by the Accounting SystemSystematically coherent and consistent reporting cannot be ensured Incomplete client and product viewSignificant revenues are not calculated on client and product levelNo allocation of revenues to clients and products Audit Trail and ControlFragmented system set-up and various instances involved make drill-downs and controls very

difficult Very limited system flexibilityMajor changes to reports cannot be implemented with reasonable efforts Technology RiskVendor support & relevant knowledge are no longer available Operational RiskSystem stability and recoverability in case of major issues may cause delays and costsSome of the processes are still completely manual. A parallel run is must in order to even

initiate the data integration of system.

GoalsGoals

1.1. Know Your CustomerKnow Your Customer

2.2. Perform Due Diligence for ClientPerform Due Diligence for Client

3.3. Run Suspicious Activity ReportsRun Suspicious Activity Reports

4.4. Early detection of Client’s suspicious Early detection of Client’s suspicious

transactions.transactions.

5.5. Save Bank from government fines, Save Bank from government fines,

6.6. Better flow of Information across the various Better flow of Information across the various

divisions of banks regarding Money Laundering divisions of banks regarding Money Laundering

clients and their transactions.clients and their transactions.

Know Your Customer Guidelines

Customer Acceptance - Ensure that you accept only legitimate and bona fide customers.

Customer Identification- Ensure that you properly identify your customers to understand the risks they may pose.

Transactions Monitoring- Monitor customers accounts and transactions to prevent or detect illegal activities.

Risk Management- Implement processes to effectively manage the risks posed by customers trying to misuse facilities.

Money Laundering Searches required by the Compliance Officer

Source: Presentation by Sanjeev Singh

KYC: If Client Involved in Money Laundering Activities

Drug TraffickingBribery / Corruption

Prostitution

Gambling

Tax Evasion

Extortion

Robbery and Fraud

White Collar Crimes

(including Insider Trading and Securities

offences)Smuggling

(arms, people, goods)

Counterfeiting and Forgery

Kidnapping

Serious Crime or All Crimes?

Organised Crime Source:

www.fintraca.gov.af/assets/ppt/AML

Goal: Integration of Company’s data to enableMoney Laundering Analysis Across Bank’s various

Divisions for Analysis to happenInvestment Banking – Europe division

GlobalWealthManagement

Fixed Income US division

Trading and SettlementSwitzerland Division

Drill downBy city, country

Drill down byFinancialproduct

Trend analysisBy region

GranularDetails by region City, state, country

Fortent Monitor

Data Manager

Profiling Engine

Operational Data Store

Detection Engine

Investigation System

Source: Fortent software training material

DDA

CIS

SWIFT

MoneyMarket

transactionhub

Load to IEF

Load to IEF

Load to IEF

Data Hub

Wires

Referencedata




Data Pipeline

FedWire

transactions

wire transactions

customers

accounts

rel man


IEF

Excel sheet, graphs

Excel sheet, graphs

Excel sheet, graphs

Zurich office

London office

New York office


Compliance OfficerCompliance Officer CCH Wall StreetCCH Wall Street 33rdrd Party Data Party Data

WSP Email Regs

Compliance EYE

OFAC

Other

Mutual Fund Data

ClearingFirms

Inefficient Use of Time

OMS

Other firmdata

a/c info Suitabilitycriteria

ManualProcesses

Increasing Workload

InconsistentAudit Terms

Reactive,Not Proactive

•Source: Fraud, Money Laundering, Terrorism & Compliance in the Financial Services Industry by WoltersKluwer - Automated Solutions to an Integrated Problem

Money Laundering Searches required by the Compliance Officer

Goal: Process change

Exchange

Electronic Communications Network

Market Maker

Firm Internalizes Order

Internetorder

Phoneorder

[1] http://www.ibtimes.com/articles/20061006/add-nyse-electronic-trading.htm

The Simple SWOT from MIS750

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

1. Brand Name2. Cash Flow

3. Well distributed office locales 4. Products and services

5. Trained experienced financial analyst6. Part of Bank’s various Divisions,

already doing transactions Online

1. Lack of in house expertise in Money Laundering implementation.

2. Lack of in house expertise in use of IT to implement Money Laundering

software.3. Huge size, global data & so slower

adoption of new technology than by small size companies.

1. Huge Online Financial services market untapped.

2. Commanding presence in US, European markets where Online

services market booming.3. Greater reach to clients implies

multiplier effect if successful4. Offer more variety of services to attract

more clients.

1. New competitors - Online Digital firms like Charles Schwab, E-Trade, Western

Union.2. Fines from the regulators.

3. New changing regulations around the world and fines for Bank in event of non

compliance to these new laws.4. Loss of Image in case Bank found guilty

of Money Laundering.

The Simple SWOT from MIS750

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

4. Existing Human Resource, Divisions, high cost Brick structure within bank, how to utiilize their services compared to Click

structure of small Online companies & consequently their low operating cost.

6. Buying / Tie up with Online Financial services

Company and learn from their low cost Click culture, Online handling of Processes like Fox TV who successfully launched My

Space on Internet though traditional TV Media company.

5. Lack of methods to know and verify Customer details from what they say and

what they actually do.6. Huge amount of daily data to be checked right from Client’s details, to Transactions,

to email correspondence between the Client and the Bank.

7. Cataloging data from around the world, from all their Clients & from all the Client’s

transactions and then storing all these details at Bank’s location.

8. Cataloging all the above details and yet comply with the Swiss Privacy Laws of Non

Disclosure of Client’s details and maintaining Client’s Privacy.

Problems:Data Disintegration Across Sources

Brokerage Credit cardWealthManagement

InvestmentBanking

Same data different name

Different data Same name

Data found here nowhere else

Different keyssame data

Weakness: Data Integration & Size of Bank

Threats:Multiple Compliances, Regulators and changing Laws

& Compliances pose new Risks for Banks

• Bank Risk :• Reputation Risk• Compliance & Regulatory

risk– Fines– Multiple agency

enforcement actions• Prison• Operational risk for Bank

- Loss of charter– Loss of GLB powers

• Litigation Risk for Bank

Fraud

USA PATRIOT Act

Money Laundering

Bank Secrecy

Act

OFAC

Terrorism

•Source: Fraud, Money Laundering, Terrorism & Compliance in the Financial Services Industry by WoltersKluwer - Automated Solutions to an Integrated Problem

Threats:Newspaper reports

• August 2007: • American Express fined USD $55 million, • Making it largest forfeiture to date & Civil

money penalty $10 million

• January 2007• Bank of America, Charlotte, NC• Penalty: USD $3 million civil money

Source: http://www.amlcft.com/cases.htm#Recent_Major_Fines_and_Penalties

StrengthsWeaknesses

1. Use Huge pockets to deploy latest Money Laundering Technology.2. Use Brand name to enter Online Money Laundering Banking Operations.

1. Provide staff IT training in Money Laundering software to make them equipped to handle Money Laundering software operations.

1. Fines from the regulators.New changing regulations around the world and fines for Bank in event of non compliance to these new laws.Loss of Image in case Bank found guilty of Money Laundering.

Tie up Start up firms to join the Online Products & services.

Tie-up and Co-Brand services with existing Online player to compete with new born Online firm.

Lower cost of operations and transaction to attract customers from competition.

Tie-up with IBM, Infosys to provide regular supply of well experienced IT workers.

Start transformation of Enterprise into IT governed enterprise parallelly in multiple divisions of bank.

Opportunities SO STRATEGIES WO STRATEGIES

ST STRATEGIES WT STRATEGIESThreats

Super SWOTCompany UBS Money Laundering Division

1. Brand Name2. Cash Flow3. Well distributed office locales 4. Products and services 5. Trained Financial workforce.6. Part of Bank Transactions Online.

1. Huge Online market untapped.2. Commanding presence in US, European 3. Greater reach to clients than competitors4. Offer more variety services

1. Lack of in house Money Laundering & IT workforce 2. Huge size, slower adoption of technology than by competitors 3. High cost of Brick structure against the Click structure and high operating cost.4. Late mover in Online market.

StrengthsWeaknesses

3. Use big distribution to get more clients than competition. 4. Use huge infrastructure to provide Add on services.

1. Use Huge pockets to deploy latest Money Laundering software & trained IT workforce from say IBM. 2. Use brand name to offer Online services and market these.

2. Slow adoption of IT3. In house trained workforce

Tie up Start up firms to join the Online Products & services.

Tie-up and Co-Brand services with existing Online player to compete with new born Online firm.

Lower cost of operations and transaction to attract customers from competition.

Tie-up with IBM, Infosys to provide regular supply of well experienced IT workers.

Start transformation of Enterprise into IT governed enterprise parallelly in multiple divisions of bank.

Opportunities SO STRATEGIES WO STRATEGIES

ST STRATEGIES WT STRATEGIESThreats

Super SWOTCompany UBS

Money Laundering

Division

Method 1: Customer Relationship ManagementCRM used for Monitoring/Reporting

Customer ID documentation

Enhanced due

diligence

Monitoring

Reporting

FIU analysis

Investigation

Application from

customer

Within the institution

Outside the institution

When should KYC research need to be carried out?

Source: www.baft.org presentation by Andrew Clark

Method 1: Customer Relationship Management Contd…

Anti Money Laundering Profiles generation 1

• Source: Fortent AML training guide

TransactionAccountTxn TypeDay

Daily SummaryAccountTxn TypeDay

Monthly SummaryAccountTxn TypeMonth

Account ProfileAccountTxn Type

Peer ProfilePeer GroupTxn Type

NOTE: Peer Groups are derived from account reference data (e.g. High Account Type and Low Account Type)

Method 1 Contd… CRM : 2Tracking Suspicious Behavior

by customer, by transaction

Comparison of current month to account profile

Comparison of current month to peer profile

Event Thresholds

Sum of scores

SB Thresholds

Alerts

Account Value

Account Volume

Insufficient Account

Insufficient Peer

Peer Volume

Peer Value

Events

Group bycustomer

Customer SecurityBlanket Infraction

Account Security Blanket Infraction

BLU Infraction

Infractions(reason for alert)

AccountProfile

PeerProfile

Monthly Summary

Daily Summary

Daily Summary

Daily Summary


Fortent Monitor

Data Manager

Profiling Engine

Operational Data Store

Detection Engine

Investigation System


Method 2: Information Organization

DDA

CIS

SWIFT

MoneyMarket

transactionhub

Load to IEF

Load to IEF

Load to IEF

Data Hub

Wires

Referencedata




Data Pipeline

FedWire

transactions

wire transactions

customers

accounts

rel man


IEF

Excel sheet, graphs

Excel sheet, graphs

Excel sheet, graphs

Zurich office

London office

New York office




The Fortent End to End Solution Overview

• 2 levels of risk assessment: KYC and Transaction Monitoring

• Plus support functions

KYCInformation & Training

Case Management

Workflow

Transaction Monitoring

Investigation & Reporting



What do we look at ?

Role

Country

Bank

Account

Island Bank Peoples Bank Lion Bank

Transaction Type

OriginatorSWIFT

Intermediary 1SWIFT

Intermediary 2SWIFT

$

Wachovia

BeneficiarySWIFT

$

Message/ProductType

SWIFT MT103

WIRE



Search Customer and transaction details by …

• Find Alerts – By Alert ID– By Account ID– By SSN/Tax ID– By Customer ID– By Bank and Country– By Party ID

• Find Bank and Country• Find Party ID• Find Accounts• Find Customers


Business Strategy

CompetitorsBanks like Barclays, Credit Swisse, Citi Group are also deploying Technology, but Business Intelligence might be UBS edge. Local banks, online financial instutions with low distribution network will loose customers badly and may even cease to exist.

CompetitorsBanks like Barclays, Credit Swisse, Citi Group as well Online firms like E-Trade, Charles Schwab are giving UBS tough competition.

Customers/ClientsEducated, high net worth individual well versed with Online services, specially younger generation will jump on, might loose those who not Online. Client prefer Telephone or web meetings, one-to-one meeting only in special cases.

Customers/ClientsFor Clients coming to bank for one-to-one meet is a norm loaded with paper and going back with bag full of financial documents.

Products and ServicesSingle UBS Executive, Client’s point of contact for all kinds of accounts, Asset, Wealth Management or Brokerage to get overall picture. Online services.

Products and ServicesAsset Management, Wealth management, Brokerage – to an extent still manual and same client has to call different divisions for different accounts

Bu

siness S

cop

e

To-BeAs-Is

Products & Services / Clients & Customers – As is

Products & Services / Clients & Customers – To Be

Business Strategy

Online Asset management, Brokerage, Taxes filing, Pension policy advise and related Online services become norm. Services over the phone, Call center services for minor administrative services like logging on bank’s Web page, opening bank account become a norm.

Note Changes

Big distribution network.

Brand Name

Deep pockets to implement any new technology within a short time.

Distin

ctive C

om

peten

cies

Internal Decisions , Regulatory, Etc.

Patriot Act details of client submission to government – implementation done Online only using Excel, Business Objects, graphs.


Patriot Act implementation done both partly manual, partly Online

Bu

siness

Go

vernan

ce

To-BeAs-Is

Bank teller puts in Customer account Office Boy

FaxesAccount details

Details received atBank’s Head office

Office Boy

Suspicious TransactionAccounts Desk

Search for Right Client Account & Right FAX

Investigator from FBI, Bank, Head BankTry to trace client’s

details

Investigator SearchAccount past trends

As – Is : Business Strategy GovernancePaper based Approach to Money Laundering

Money deposit by Client Bank manager

Compiles transaction

Volume of paper work In Investigation and

Administrative loop holesLeads to loss of

Investigation.Is this Client records

Processing fine in 2008?

As – Is : Business Strategy

Tra

inin

g an

d A

war

ene

ss P

rogr

am

Cost of Compliance



Man

agem

ent

Co

mm

itmen









AML Reporting

Risk assessment




Business Strategy Governance: To Be


To-Be: Business Strategy

Business Infrastructure

Fast typing skills mandatory along with use of all MS Office products from Word, to Excel to Power point, Outlook, Web browsing along with specilised software like Database programmes like SQL, Business Objects, Charles River for few.

Paper based work, typing skills, telephonic skills, PC skills limited to MS Word and limited level of MS Excel.

HR

/Skills

Separate head for Money Laundering was brought in. Person was of level of Director reporting directly to Executive Committee and working in parallel with CIO.

Division was headed by Business Analyst, Project Manager who was much low in Management ranking.

Ad

min

istrative

Process have been designed to be all Online, data transfer, sharing, all online with click of a button. Bank’s declining position, bank responsibility to comply with new new compliances and unhappy customers with slower transaction speed as compared to competitors.

Few process were manual, few based on Excel sheets, few other online but there was no integration, so one division could not exchange information with other without use of paper.

Key

Pro

cesses

To-BeAs-Is




Office Boy




details


As – Is : Administrative Approach to Money Laundering REACTIVE APPROACH







Current Key Processes – As Is

Brokerage

Asset Manageme

nt

Private Banking

Investment

Banking

Institutional investors

** Above Pictures taken from Google Images

Future Key Processes – To Be

Brokerage

Asset Manageme

nt

Private Banking

Investment

Banking



Organisational changesAs Is To Be

Hierarchy based org Structure Services, Product line based org Structure

Human ResourcesAs is To Be


Include all areas that are relevant after the project implementation.

Note Changes


Include all areas that are relevant before the project implementation

Go

vernan

ce

Key Applications

After project implementation

Key Technologies

After project implementation

Key Applications

Prior to project implementation

Key Technologies

Prior to project implementation

Tech

no

log

y S

cop

e

Those areas in which the company has a distinct or competitive advantage over their competition after the implementation of the project.

Note Changes

Those areas in which the company has a distinct or competitive advantage over their competition.

System

C

om

peten

cy

To-BeAs-Is

IT Strategy




Office Boy




details


As – Is : IT Strategy Paper based Approach to Money Laundering







IT Strategy - As Is

IT Strategy – To Be

Infrastructural Re Design & Deployment

US Wealth Management

Europe Fixed Income account

UBS Investment banking

US Exchange trading

Wealth management Europe

Data Sources

UBS Transaction Data

Oracle

Sybase

ETL Software Data Stores Data AnalysisTools - Actuate

Users

SAP

Oracle

Institutional investment

UBS

Data

Staging

Extract

SAS

LoadInformatica

Data Marts

UBSData

Warehouse

Meta Data

WealthManagement

Investment Banking

CalculationEngine

Actuate

Actuate

Zurich office

Excel sheet, graphs

Excel sheet, graphs

Excel sheet, graphs

Stamford Office

ActuateCognos

SAS

New York office

Actuate

London OfficeOracle

SAP

Excel sheet, graphs

Money Laundering

Data warehouse

IT Strategy: To BeAs a result of Process change implementation

Exchange

Electronic Communications Network

Market Maker

Firm Internalizes Order

Internetorder

Phoneorder

IT InfrastructureAs-Is To-Be

Architecture

The IT Architecture prior to the project

The IT Architecture after the project implementation.

Key Processes

The Key Processes prior to the project.

The Key Processes after the project implementation.

H/R/SKILLS

HR duties and functions prior to the project.

HR duties and functions after the project.

Pre requisites for Integrated approach to trade processing: centralisation of information collection process

… toCentralised information source on correspondent banks

From …Numerous bilateral information exchanges within financial institutions

Source: www.swift.com/index.cfm?item_id=3878

As – Is Architecture


Europe Wealth Management

Investment Banking

US Wealth Management Board meet

Europe Wealth Management Board meet

Brokerage Management Board meet

To- Be Architecture

The name of the divisions of UBS company are the following:

1. Wealth Management – US Division2. Wealth Management – Europe

Division3. Institutional Banking4. Investment Banking5. Private Banking – High net worth

individual account, Retirement policy accounts

6. Fixed Income Division7. Brokerage and Exchange trading

division


Europe Fixed Income

US Exchange trading

US Wealth ManagementOracle

Sybase

SAP

Oracle

UBS

Data

Staging

Extract

SAS

Oracle

SAP




Europe Fixed Income account


US Exchange trading


Data Sources

UBS Transaction Data

Oracle

Sybase

ETL Software Data Stores Data AnalysisTools - Actuate

Users

SAP

Oracle


UBS

Data

Staging

Extract

SAS

LoadInformatica

Data Marts

UBSData

Warehouse

Meta Data

WealthManagement

Investment Banking

CalculationEngine

Actuate

Actuate

Zurich office

Excel sheet, graphs

Excel sheet, graphs

Excel sheet, graphs

Stamford Office

ActuateCognos

SAS

New York office

Actuate

London OfficeOracle

SAP

Excel sheet, graphs

DDA

CIS

SWIFT

MoneyMarket

transactionhub

Load to IEF

Load to IEF

Load to IEF

Data Hub

Wires

Referencedata




Data Pipeline

FedWire

transactions

wire transactions

customers

accounts

rel man


IEF

Excel sheet, graphs

Excel sheet, graphs

Excel sheet, graphs

Zurich office

London office

New York office


Key Key Process Process changechange

Key Key Process Process changechangeImplementaImplementa

tiontionOf IT in Of IT in handinghanding

TransactionTransactionss

ImplementaImplementationtion

Of IT in Of IT in handinghanding

TransactionTransactionss

Setting upSetting upSeparate Separate Money Money

Laundering Laundering DivisionDivision

Setting upSetting upSeparate Separate Money Money

Laundering Laundering DivisionDivision

Brick to Brick to Click Click OrganizatiOrganization for on for Internal Internal reporting reporting & HR & HR changeschanges

Brick to Brick to Click Click OrganizatiOrganization for on for Internal Internal reporting reporting & HR & HR changeschanges

Merger, Tie Merger, Tie up with up with upcomingupcomingOnline Online Financial Financial companies & companies & WebsitesWebsites

Merger, Tie Merger, Tie up with up with upcomingupcomingOnline Online Financial Financial companies & companies & WebsitesWebsites


AlternativesAlternatives

CentralizatioCentralization n

and and Integration Integration

ofofVarious Various

DivisionsDivisions

Merger, Partner with other Online Merger, Partner with other Online Financial companiesFinancial companies

MergerMerger with Online Financial with Online Financial companies like Charles companies like Charles Schaub, Google money, Pay Schaub, Google money, Pay Pal.Pal.

Pro’sPro’s Learn from experience and Learn from experience and

expertise of Online expertise of Online companies and use expertise companies and use expertise for Inhouse AML for Inhouse AML implementation.implementation.

ConsCons Tie up with Financial Tie up with Financial

companies with incompatible companies with incompatible with values of UBS or where with values of UBS or where processes of merging processes of merging company or philosophy is company or philosophy is different.different.

Difficult to synchronize the Difficult to synchronize the processes, more work for processes, more work for Employee of both companies, Employee of both companies,

Western UnionOr Charles Schaub which are in Online Financial services business


Go International, grow Go International, grow international international 1.1. Alter existing Organisational Alter existing Organisational

structure structure 2.2. Tie up Online Financial services Tie up Online Financial services

companies worldwide in companies worldwide in providing Data required for providing Data required for investogating Money Laundering investogating Money Laundering activities.activities.

3.3. Focus on emerging markets, Focus on emerging markets, BRICK countries Brazil, Russia, BRICK countries Brazil, Russia, India, China, and South Korea. India, China, and South Korea. by implementing the Money by implementing the Money Laundering Compliances in the Laundering Compliances in the respective countries ahead of respective countries ahead of competitors and get advantage of competitors and get advantage of first mover in these markets.first mover in these markets.

Pros Pros 1.1. Greater global presence and Greater global presence and

possibility of higher profits in possibility of higher profits in emerging markets.emerging markets.

ConsCons1.1. If company get late & is Late If company get late & is Late

entrant into the market then the entrant into the market then the above advantages might get lost.above advantages might get lost.

2.2. Innovation & first mover Innovation & first mover disadvantages of entering new disadvantages of entering new markets without prior market markets without prior market experience.experience.

3.3. Values of UBS & new partners do Values of UBS & new partners do not matchnot match


Transform workforce, move from Transform workforce, move from Brick to Click Organization only for Brick to Click Organization only for

Internal reportingInternal reporting Workers / Paralegals be Train / Workers / Paralegals be Train /

retrenched in order to prepare retrenched in order to prepare company to survive in the Internet company to survive in the Internet age.age.

Change process – Demand supply, Change process – Demand supply, distribution, marketing, Seat distribution, marketing, Seat reservation. reservation.

Strengthening Technology division Strengthening Technology division and Tie – up / Acquire with Online and Tie – up / Acquire with Online financial websitesfinancial websites

ProsPros Save money from Pension benefits, Save money from Pension benefits,

job cuts, hiring younger age call job cuts, hiring younger age call centers workerscenters workers

ConsCons Face employee wrath, Face employee wrath,

dissatisfaction could lead to hostile dissatisfaction could lead to hostile takeover by a competitor like takeover by a competitor like American Airlines.American Airlines.** Above Pictures taken from Google

Images

Future Key Processes – To Be

Brokerage

Asset Manageme

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Private Banking

Investment

Banking



RecommendationsMethodology:Incremental method is recommended in today fast changing business environment. Some might even

recommended agile approach wherein smaller increments of redesign and then feedback is done. But, this approach is found to be more suitable for Technology firms.

In this approach as stated the Technology team redesign, conducts test of design and then feedback and approval of the business owner. getting feedback from all concerned stakeholders, thereby diminishing the chances of risk in case the redesign of process is not liked. And, all the processes happens almost in parallel, one starts and soon other starts. This ensures speed of the project work getting accomplished and with consent of all the stakeholders parties, both Technical and the Business.

In event of a not so good design by the IT team, another redesign can be done and presented. Since, small portion, so loss of time and money will be less compared to waterfall where whole part is completed first before moving to the next.

HRApart from Methodology, Human resources is another important component of accomplishing the

project. UBS could decide to get all the project done:1. In-House 2. Whole IBM or Infosys 3. Mix of In-House, IBM, Infosys

In-house does not suit as UBS Technology team might not have the requisite expertise, an IBM or Infosys professional have due to working in specialized environment by IBM or Infosys. Completely, depending upon the technology team of IBM, Infosys too is not favorable as consulting companies do not have the exact idea what the top bosses would want or what is the requirement as per the Financial industry and UBS values norm.

Hence, a mix of UBS Technology team and consulting companies like IBM, Infosys is recommended.

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AML Reporting

Risk assessment





Pre requisites for Integrated approach to MLBank: centralisation of information collection process

… toCentralised information source on correspondent banks

From …Numerous bilateral information exchanges

Source: www.swift.com/index.cfm?item_id=3878

References

73MIS 760 Team Case

1. www.cfdg.org.uk/.../events_h_050518_E3%20-%20Money%20Laundering%20and%20Fraud%20-%20Don%20Bawtree.ppt Presentation from Don Rawtree, Don Bawtree, Partner, BDO Stoy Hayward LLP, Emerald House, East Street, Epsom, Surrey, KT17 1HS

2. Presentation on Briefing on ‘KYC’ Norms and ‘AML’ Measures for IBA Member Banks by Sanjeev Singh, Additional Director, FIU-IND, Financial Intelligence Unit-India

3. www.fintraca.gov.af/assets/ppt/AML

4.http://www.nchelp.org/elibrary/Presentations/2003/2003WinterLegalAffairsMeeting/Consumer%20Privacy%20Issues.ppt

5. www.cityinformation.org.uk/Events/presentations/2007-May-MicheleBate.ppt 6. http://www.amlcft.com/cases.htm#Recent_Major_Fines_and_Penalties

7. Presentation on Briefing on ‘KYC’ Norms and ‘AML’ Measures for IBA Member Banks

References• 8. www.baft.org/content_folders/2nd%20European%20Bank-to-Bank%20Forum/

andrew_clark.ppt

9. Fortent AML training guide

• 10. www.kentlaw.edu/faculty/rwarner/classes/certificate/crime/USA%20Patriot%20Act.ppt

11. www.baft.org/content_folders/2nd%20European%20Bank-to-Bank%20Forum/andrew_clark.ppt

• 12. www.swift.com/index.cfm?item_id=3878• • 13.Some of the inputs are from reading from working at UBS so don’t have particular

slides to quote.

References & Bibliography

• Missing - References : To be added

• Sources on each slides need to be added

“Cheating during in-class tests or take-home examinations or homework is, of course, illegal and immoral. A Graduate Academic Evaluation Board exists to investigate academic improprieties, conduct hearings, and determine any necessary actions. The term ‘academic impropriety’ is meant to include, but is not limited to, cheating on homework, during in-class or take home examinations and plagiarism.”

Consequences of academic impropriety are severe, ranging from receiving an “F” in a course, to warning from the Dean of the Graduate School, which becomes a part of the permanent student record, to expulsion.

Consistent with the above statements, all homework exercises, tests and exams that are designated as individual assignments must contain the following signed statement before they can be accepted for grading.

I, Kartik Mehta, pledge on my honor that I have not given or received any unauthorized assistance on this assignment/examination. I ,Kartik Mehta, further pledge that I have not copied any material from a book, article, the Internet or any other source except where I have expressly cited the source.

MIS 760 Team Case

Ethical Statement