day1 - compliance roadmap

Compliance Roadmap

SWIFT Benelux Forum

22 April 2015

Xavier Kervyn, Product Manager, SWIFT

SWIFT Financial Crime Compliance Roadmap

Standards

Data repositories

Traffic analysis

Quality assurance

Processing services

Sanctions KYC AML

Sanctions list

management service KYC Registry

Compliance Analytics

Sanctions Testing

(testing / tuning of transaction & client systems) AML testing & tuning

FATF 16 information quality

Client/Name screening

Sanctions Screening Traffic Restriction (RMA)

Live Development Qualification Exploration

Compliance Roadmap - Benelux Business Forum 2015

Sanctions Screening

Standards

Data repositories

Traffic analysis

Quality assurance

Processing services

Sanctions KYC AML

Sanctions list



Sanctions Testing







Sanctions impact

• Fines are getting bigger, but more interestingly:

– Cost of remediation exceeds amount of fine

– Includes limitation to business (e.g. no USD clearing)

– Regulators pay more attention to the quality of the screening

• Banks are terminating correspondent relationships due to:

– Risk factor (weak financial crime controls )

– Low return on relationship due to Cost of compliance

• Impacts large and small financial institutions

– Especially smaller FIs due to the ever growing requirements

– Large FIs face increased regulatory scrutiny


• Increasing pressure from

Regulators and Correspondents to

be sanctions compliant

• Available screening solutions

complex and costly to maintain

• Increasing challenges for mid and

low-volume financial institutions

A centralised

screening

service

hosted by

SWIFT

Sanctions Screening- SWIFT’s centralised screening service

A SWIFT solution to screen all International Payments


Your institution

Your correspondents

Sanctions screening over SWIFT

• Screening engine & user interface

• Sanctions List update service with enhancements

• Minimum/no installation or integration required

• Centrally hosted and operated by SWIFT for SWIFT users

• Real-time Compliance Roadmap - Benelux Business Forum 2015

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Beyond FIN - new Sanctions Screening option

Jan

2015

Your institution Your correspondent

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Based

on

Copy

Based

on

Connector


Sanctions Testing

Standards

Data repositories

Traffic analysis

Quality assurance

Processing services

Sanctions KYC AML

Sanctions list



Sanctions Testing







In a world of unprecedented complexity and change:

• How can I be sure my screening solution protects my institution?

• How can I demonstrate to regulators that I understand my solution

and how it mitigates risks?

• How can I make my screening solution more effective – and more

efficient?

Banks face a sanctions compliance challenge


Effectiveness

• Provide assurance that your filter works

• Measure system’s fuzzy

matching performance

• Assess coverage of sanctions lists

• Align screening system to your

risk appetite

Efficiency

• Reduce false positives

through iterative testing

• Build optimisation tests into

your processes

• Understand parameter changes

• Manage and tune rules and “good-guy” lists

Testing Meeting regulatory demands

Tuning Managing cost and resources

Sanctions compliance – balancing priorities

with


We provide… • Unrivalled coverage of sanctions

lists and message types

• Testing with your own private lists

• Automated testing and test comparisons

• Exact and fuzzy matching

performance assessment

• Analyst toolbox and full reporting

• Risk appetite tracking

Sanctions Testing features & benefits

Giving you… • Better insight into your Sanctions environment

• Assurance that your environment behaves as expected

• Ability to tune your filter and manage costs

• Control of your own assurance processes

• Standardised community-based testing approach

Through… • Instant access to results and subject matter expertise

• Secure, cloud-based application – zero footprint


The KYC Registry

Standards

Data repositories

Traffic analysis

Quality assurance

Processing services

Sanctions KYC AML

Sanctions list



Sanctions Testing







The KYC Registry by SWIFT: Single source to collect and share your KYC data for CB

7,000+ banks on SWIFT = 1.3M+

connections

Single standard for KYC requirements

Trusted 3rd party to validate & store

data with built-in access and entitlements

Unique content: SWIFT Profile, EDD data


SWIFT Profile in a nutshell

YOUR

CORRESPONDENT

COUNTRY OF YOUR

CORRESPONDENT’S

COUNTERPARTY

YOUR

CORRESPONDENT’S

DIRECT EXPOSURE

YOUR

CORRESPONDENT’S

INDIRECT EXPOSURE

PUBLISHER OF THE

SWIFT PROFILE

CONSUMER OF THE

SWIFT PROFILE

YOU

COUNTRY OF

ORDERING / BENEFICIARY

PARTY’S BANK

WHAT IT IS

Does your institution have direct or indirect exposure in FATF

high risk or sanctioned jurisdictions? It addresses the challenge

of Know Your Customer’s Customer.

• Provides unique insights into bank’s activity, to identify

correspondents located in high risk or sanctioned

jurisdictions

• Based on unique factual data

• Substantiates the declared behaviour & increase your

credibility

• Promotes a pro-active approach & improve your risk

assessment

• Allows focusing the dialogue with your correspondent on

highest risk areas

KEY BENEFITS



Standards

Data repositories

Traffic analysis

Quality assurance

Processing services

Sanctions KYC AML

Sanctions list



Sanctions Testing







Financial crime risk has changed

Need to know …. need to know everything, everywhere


Compliance Analytics features & benefits

We provide…

• Rich, accurate global dataset at institutional and

counterparty level

• Aggregated country data as a context to your activity

• Packaged reports showing risk concentration,

behavioural anomalies, and unusual patterns or trends

• Event-driven alerting

Giving you…

• Better understanding of your evolving business context

• Single source of risk assessment for correspondent banking

• Ability to prioritise activities

• Proof of compliance with policies

• Ability to anticipate emerging trends

• Neutral third-party information management and reporting

Through

• Single web portal – zero

footprint

• Interactive investigation

tool


List Management

Standards

Data repositories

Traffic analysis

Quality assurance

Processing services

Sanctions KYC AML

Sanctions list



Sanctions Testing







35

Some of the challenges…

Lack of

standard

format Data errors Private lists


Multiple

sources

Lists

enrichment Consistency

List Management: Functional View


Public lists

Premium lists

Community lists

OFAC

EU

HMT

…

Dow Jones

sanctions alert

DJ PEP list

World-check

other

Cities & ports

Sanctioned BICs

SDN Affiliated

entities

Private list bank A

Private list bank B

Bank A

Bank B

Transaction filter

country A

Customer filter

country A

Transaction filter

country B

Customer filter

country B

Transaction filter

country Z

Customer filter

country Z

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Search & navigate

Audit & archiving

Feedback mechanism

FATF 16

Standards

Data repositories

Traffic analysis

Quality assurance

Processing services

Sanctions KYC AML

Sanctions list



Sanctions Testing







Financial Action Task Force (FATF) - Recommendation 16


“Countries should ensure that financial institutions include required and accurate originator information,

and required beneficiary information, on wire transfers and related messages, and that the information

remains with the wire transfer or related message throughout the payment chain.

Countries should ensure that financial institutions monitor wire transfers for the purpose of detecting

those which lack required originator and/or beneficiary information, and take appropriate measures.”

Feb 2012

• The European Commission issued a proposal on the 5th of February 2013

on information accompanying transfers of funds

• The resolution is expected to be adopted 2Q2015.

• The Payments Market Practice Group (PMPG) has just published

guidelines for the implementation of FATF recommendation 16 (“FATF16”)

• Banks will need to comply early 2017


• New and increased regulatory

expectations

• Lack of commonly accepted rules:

what is a FATF16 compliant

payment?

• Accuracy of the data and results

• Difficult to obtain a global institutional

view

• A lot of resistance in the community

to move to stricter (less free format)

standards due to high costs

Compliance Analytics – new payments data quality module

SWIFT is considering offering a shared central FATF

Validation service that would:

1) Automate a set of checks to assess presence of

information required by FATF Rec.16 and relevant

legislation.

2) Offer post-fact reporting capabilities (dashboard)

to support compliance enhancement of outbound and

inbound flows.

Thank you


day1 - compliance roadmap

Economy & Finance

screening banks

sanctions impact fines

swift solution

tuning fatf

small financial institutions

requirements large fis

low return

increasing pressure