Sanctions Screening

Alex Lee

Director, Payments Markets, SWIFT Asia Pacific

31 July 2014216 contracts85 countries

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Context

• Regulatory scrutiny and enforcementof sanctions policies is increasing

• Available screening solutions complex and costly to maintain

• Challenges for low-volume financial institutions

• Common needs in terms of regulatory requirements

• Large financial institutions interested in receiving “cleaner” payments from their correspondents

SWIFT has launched a centralised Sanctions Screening

service

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Service overview - as sender

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Service overview - as receiver

notification

Your institution

Messages resulting in alerts are temporarily held in the filter and notified to the bank for investigation

Your correspondents

The Level 1 user logs-in to the Sanctions portal to review the alerts

L1 user

Your institution

Your correspondents

The Level 1 user selects one of the pending alerts to view the details

Your institution

Your correspondents

Message content

Hits generated by the message & sanctions list identifier

Sanctions list record detail

Escalate to Level 2

Notification

L2 user

Release the message

Your institution

Your correspondentsL2 user

Abort or Flag the message

Release the message

Your institution

Your correspondentsL2 user

abortnotif.

When the user confirms a true hit on an outgoing message:• The original message is aborted• An abort notification (MT019) is sent to the user

Your institution

Your correspondentsL2 user

When the user confirms a true hit on an incoming message:• The original message is flagged…• …then delivered to the recipient that routes it to a special queue

for appropriate processing

special queue

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Public sanctions list supported

Country List Country ListAustralia Department of Foreign Affairs and Trade New Zealand New Zealand Police

DFAT Countries Embargoes Singapore Monetary Authority of Singapore - Investor Alert ListDFAT Iran Specified Entities List Switzerland Secretariat d'Etat a l'Economie

Canada Office of the Superintendent of Financial Institutions SECO Countries EmbargoesOSFI - United Nations Act Sanctions United Kingdom Her Majestys TreasuryCanada Foreign Affairs and International Trade HMT Countries EmbargoesFAIT Countries Embargoes United Nations United Nations

China People’s Republic of China – Ministry of Public Security UN Countries EmbargoesEuropean Union EUROPE Countries Embargoes United States of

AmericaOffice of Foreign Assets Control SDN list

European Official Journal OFAC Countries EmbargoesFrance Journal Officiel francais OFAC Palestinian Legislative CouncilHong Kong Hong Kong Monetary Authority OFAC Part 561 list

HKMA Countries Embargoes OFAC Foreign Sanctions EvadersJapan Ministry of Finance OFAC Sectoral Sanctions Identifications listNetherlands Frozen Assets List - Dutch Government Financial Crimes Enforcement Network

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Sanctions Screening – Benefits

• Cost efficiency • Ready to use • Easy to use • Real time• State of the art

• Security • Resilience • Operational

excellence

A service provided by

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“We value the ability to use a secure, automated system that ensures we are compliant with the most up-to-date sanctions lists.”Mohamed Isa AL Mutaweh, Chief Executive Officer & Member of the board of Directors, Al Baraka Islamic Bank

Screening of Any Formats

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Current solution (FIN only)• Quick to implement, cost

effective and zero footprint • Very successful so far: 216

customers in 85 countries in 2 years

Leading to increasing demand for • More flexibility to screen FIN• Ability to screen other formats

Enhance the current solution

with an complementary architecture to

cover additional needs

Background

Screening of Any Formats builds on the current Sanctions Screening service with a new access channel to the filter to enable greater flexibility and support the needs of more sophisticated users.

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Sanctions

Connector

Back Office

SanctionsScreening

FINInterface

Sanctions Screening: FIN - SAF

Back Office

SWIFT/other network

Interface

FIN

SAF (Screening of Any Format) Newend 2014

SWIFT

Payment to be screened

“Good” payment

“Rejected” payment

1/ Screening other formats than FIN, such as: – Local non-SWIFT formats (e.g. domestic RTGS/ACH)– Internal format (before transformation to FIN, for instance)– ISO20022 MX messages – FIN MT or ISO20022 MX bulked in a file transmitted over FileAct or other file

transfer; sent through SWIFT or non-SWIFT channels.

2/ More flexibility for screening FIN:– More flexibility on which traffic is sent to the filter (e.g. exclude traffic from

Head Office)– Screen additional categories (e.g. Cat 3, 5 & 9)– Ability to screen the messages before they are sent to SWIFT (and an

acknowledgement is sent back to the Back Office) – More time to decide on alerts

3/ Same user experience as today – Same GUI, same users, same tokens, etc.

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Benefits

Sanctions Screening Any Formats – EIB - May 2014

Sanctions

Connector

SanctionsScreening

Back Office

SWIFT/other network

Interface

SWIFTInterface

Alliance Access

Sanctions

Connector

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SAF v1 – Connector in Alliance Access

Payment to be screened

“Good” payment

“Rejected” payment

Advantages:- Conversion capabilities (adapts to any format)- Minimal impact: No additional footprint, easy to implement, no additional maintenance, etc.- Inherits integration capabilities of Alliance Access (MQ, Files, etc.)- Re-use of SWIFT infrastructure (security, resilience, ….)

SWIFT KYC Registry

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The ContextAn unprecedented challenge to comply with KYC legal requirements

SWIFT KYC

Registry

Complex and inconsistent requirements across jurisdictions

Cumbersome, repetitive and inefficient bilateral exchanges

Unavailability and poor quality of information

Complex and inconsistent requirements across jurisdictions

Cumbersome, repetitive and inefficient bilateral exchanges

Unavailability and poor quality of information

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Collection of data and documents• Structured data• Supporting documents• Maintenance • Archiving and versioning

Controls• Completeness, validity, accuracy

Reporting and monitoring• Platform activity reporting and practices• Audit trail• Notifications of changes

Value added services• SWIFT profile

I

n s

cope

Ou

t of

sco

pe Name screening• List screening (PEP, blacklist checking)• Alert management or bad press

Risk scoring• SWIFT proposed risk score• Communication on (non)-accepted

counterparties

Due Diligence• Around intermediaries

Regulatory watch and market practices

• Monitoring of legal/regulatory updates

What will the SWIFT KYC Registry bein its first phase

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SWIFT ProfileA new way to bring more transparency on your correspondents’ activities

• Objective and factual, initially based on FIN traffic• Helps validate declared behaviour• Substantiates risk rating process• Different levels of granularity up to the level of

nested correspondents• Optional and shared at bank’s discretion• Specific, transparent and unambiguous• Does not contain competitive informationS

WIF

T P

rofil

e

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SWIFT Profile – Granularity

SWIFT ProfileLevel 3 – “Nested Correspondents”

Country BIC Code Bank NameTurkey TRBATRIS Turkish Bank A

TRBATRIS Turkish Bank BTRBATRIS Turkish Bank CTRBATRIS Turkish Bank DTRBATRIS Turkish Bank ETRBATRIS Turkish Bank FTRBATRIS Turkish Bank GTRBATRIS Turkish Bank HTRBATRIS Turkish Bank I

Indonesia IDBAIDJX Indonesian Bank AIDBAIDJX Indonesian Bank BIDBAIDJX Indonesian Bank CIDBAIDJX Indonesian Bank DIDBAIDJX Indonesian Bank EIDBAIDJX Indonesian Bank FIDBAIDJX Indonesian Bank GIDBAIDJX Indonesian Bank HIDBAIDJX Indonesian Bank I

SWIFT ProfileLevel 1

Does Bank A have correspondent banking activity with entities located in countries under close monitoring of the FATF?

Yes

No

Identities of Bank A’s correspondents per concerned jurisdiction:

SWIFT ProfileLevel 2 – “Nested Countries”

Bank A’s correspondent banking traffic with concerned FATF jurisdictions. Share per country:

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January ’14

• Formal announcement of the KYC Registry initiative

• Start of KYC Working Group & data contribution

September ’14

• Open the Registry for data contribution by a number of selected banks

December ’14

• Open the Registry for data contribution and consultation by all banks

• Commercial launch of the Registry

TimelineThe journey starts today

Bootstrap Controlled ramp-up

General availability