Sanctions Risk ManagementSymposium

September 18-19, 2017 | The Princeton Club | New York, NY

incooperation with

September18,4:45– 5:30PM

DesigningaSanctions/ExportControlsRiskAssessmentThatGovernmentAgencies(inAnyCountry)WillApplaud

1

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

Moderator

Panelists

2

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

3

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

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• IncorrectRiskRatingMethodology• AssessingRelevantRiskAreas• FailingtoAssessTopicsofInteresttoRegulators• OFAC• AML,Export,Anticorruption•MisrepresentingDataorResults• DataQuality• ExpertJudgment• LackofSenior-LevelOwnership•MustShowInvolvement• FailingtoActontheResults• ImplementationofActionPlans

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

MostCommonRiskAssessmentMisstepswithRegulators

5

Sanctions Risk ManagementSymposium

September 18-19, 2017 | The Princeton Club | New York, NY

incooperation with

Questions?

6

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

BasePenaltyMatrixfromOFAC

EnforcementGuidelines

7

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

FinancialCrimesEnforcementNetwork(FinCEN)

§ PartofU.S.Treasury§ Establishedin1990§ Safeguardsthefinancialsystemfromillicituseandcombats

moneylaunderingandpromotesnationalsecuritythroughthecollection,analysis,anddisseminationoffinancialintelligenceandstrategicuseoffinancialauthorities.

www.fincen.gov

8

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

BISEnforcementGuidelines

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§ GuidanceonChargingandPenaltyDeterminationsinSettlementofAdministrativeEnforcementCases

§ RevisedJune22,2016§ Promotesgreatertransparencyandpredictabilitytotheadministrative

enforcementprocess.§ AlignsproceduresofDOC’OfficeofExportEnforcementwiththoseofOFAC,

bothofwhichadministerbulkofprogramsunderInternationalEmergencyEconomicPowersAct.

§ https://www.bis.doc.gov/index.php/documents/pdfs/1567-administrative-enforcement-guidelines/file

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

OFACEnforcementActions2003– Sept.2017

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413

238

129

106

64

24 19 18 16

10

0

50

100

150

200

250

300

350

400

450

Cuba Iran Sudan Yugoslavia Libya Kingpin/SDNT Iraq Burma WMD Terrorism

WhatSanctionsProgramWasViolated

CUBA IRAN SUDAN YUGOSL

413

238

129106

64

LIBYA KINGPIN

24 19

IRAQ BURMA

18

WMD

16 10

TERRORISM

WhatSanctionsProgramWasViolated?

Sourcedata:OFAC

AnalysisandCompilationbySanctionsAlert.com

InherentRisk

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

Source:Wolfsberg FAQsonRiskAssessmentsforML,SanctionsandBribery&Corruption

Representstheexposuretomoneylaundering,sanctions orbriberyandcorruptionriskintheabsenceofanycontrolenvironmentbeingapplied.

11

ResidualRisk

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

Source:Wolfsberg FAQsonRiskAssessmentsforML,SanctionsandBribery&Corruption

Theriskthatremainsaftercontrolsareappliedtotheinherentrisk.Itisdeterminedby

balancingthelevelofinherentriskwiththeoverallstrengthoftheriskmanagement

activities/controls.TheresidualriskratingisusedtoassesswhethertheMLriskswithinthe

FIarebeingadequatelymanaged.12

RiskAssessment

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

Source:Wolfsberg FAQsonRiskAssessmentsforML,SanctionsandBribery&Corruption

Anexerciseusedtoidentifykeyrisksfacedbythefirmandtotestthecontrolsthatafirmhasinplacetomitigatetheserisks.Riskscanbebothexternalandinternaltothefirm.Theriskassessmentaimstomeasurethetotal

exposureafirmhastotherisksitfacesandtoplanactionstoreducetheserisks.

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Wolfsberg:ConventionalML/TF/Sanctions/ABCRiskAssessmentMethodology

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

Source:Wolfsberg FAQsonRiskAssessmentsforML,SanctionsandBribery&Corruption

14

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

Source:WolfsbergFAQsonRiskAssessmentsforML,SanctionsandBribery&Corruption

15

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

Source:FFIECBSA/AMLExaminationManual

APPENDIX M: QUANTITY OF RISK MATRIX—OFAC PROCEDURES

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Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

ExportCompliance

Source:DepartmentofCommerce,BIS:2017ExportComplianceGuidelines:TheElementsofanEffectiveComplianceProgramhttps://www.bis.doc.gov/index.php/forms-documents/pdfs/1641-ecp/file

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Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

ExportComplianceRisksand

WaystoMitigate

Source:DepartmentofCommerce,BIS:2017ExportComplianceGuidelines:TheElementsofanEffectiveComplianceProgramhttps://www.bis.doc.gov/index.php/forms-documents/pdfs/1641-ecp/file

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Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

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§Notproperlydocumented§Didnotincorporatealllinesofbusinessorentities§Didnotconsiderallmajorriskcategories§Policiesdidnotspecifyfrequencyofriskassessmentupdates§Nodocumentedmethodologyforassigningriskrankings§Policies,proceduresnotcommensuratewithbank/company’sriskprofile§Notalignedtopoliciesandprocedures

SampleDeficienciesinSanctionsRiskAssessment

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

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§ Scanningagainstinapplicablewatchlistsofferedbyvendor§ Scanningagainstmoreliststhannecessary§Notscanningagainstrelevantlists§ Inadequatemappingofdatafieldstowatchlists§Dataintegrityissues§ Inadequatealgorithms/fuzzylogic

SampleDeficienciesinConfigurationSanctionsListScreening

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

21

NewYorkDepartmentofFinancialServices(DFS)Part504Rule§ RuleeffectiveJanuary1,2017§ FirstcertificationdueonApril18,2018§Whoissubject?

§ Banksandnon-bankinstitutionslicensedorcharteredunderNYlaw

§ Banks§ Branchesandagenciesofforeignbanks§ Trustcompanies§ Privatebankers§ Savingsbanks§ Savingsandloanassociations

RequirementsofFilteringProgramReasonablydesigned forpurposeofinterdicting

transactionsthatareprohibitedbyOFAC.Basedonon-going,enterprisewideRiskAssessmentBasedontechnology,processesortoolsreasonablydesigned toidentifyprohibitedtransactions through

nameandaccountmatchingorotherwiseEnd-to-endpre- andpost-implementationtestingof

variousfactorsincludingmappingriskstoOFACsanctionslists,matchinglogicdetectionscenariosand

otherfactors,asrelevantDocumentation oftheprogramanditstoolsand

processes

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

22

Source:AudiencePollfromSanctionsAlert.comAugust2017WebinaronNYDFSPart504

Rule(238attendees)

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

23

Source:AudiencePollfromSanctionsAlert.comAugust2017WebinaronNYDFSPart504

Rule(238attendees)