compliance services solutions

Compliance Services

Solutions

Tony Wicks, Director, Compliance Services

James Wills, Senior Business Manager, Initiatives

Community inspired compliance services

SWIFT Business Forum Canada - 14 April 2015 2

As an industry-owned cooperative and the global network for secure

financial communications and standards, SWIFT is uniquely placed to

help solve the financial crime compliance challenge through

collaborative efforts and innovation

Significant costs

at stake….

... Yet no competitive

advantage for banks

Financial crime is top of

the agenda for banks

All geographies / All types

of players impacted

Lots of duplication…

… for universal challenges

Development

Qualification

Exploration

Sanctions list

management

service

AML testing

& tuning

2013

100 Screening customers

Compliance Forum Dubai

Dedicated compliance unit

2014

Compliance Analytics

SWIFT acquires Omnicision


Compliance Forum in Boston

The KYC Registry

2015


Screening of all formats

KYC Registry rollout

SWIFT Profile

SWIFT 2020

Client/

Name

screening

FATF 16

information

quality

Additional

KYC

services

Analytics

for smaller

institutions

Vision: Financial Crime Compliance Utility


2012

Sanctions Screening

Sanctions Testing

Compliance Forum Osaka

Community-inspired solution portfolio

Sanctions Testing

20 top-tier banks with 35% of SWIFT message traffic

Maximise the effectiveness

and efficiency of your

sanctions environment

Compliance Analytics

8 banks with

more than 10%

of SWIFT

message traffic

Enhanced understanding

& management of financial

crime-related risk.

Sanctions Screening

320 customers 16 central banks 100K messages per day

Hosted solution for cost-

effective compliance with

sanctions regulations.

The

KYC Registry

12 leading banks

in working group,

270 institutions

and counting..

One global source of KYC

information for

correspondent banking


SANCTIONS TESTING


In the unlikely event of a fire …

• Fire alarms mitigate low frequency

but high impact events

• Irrespective of the likelihood of a

fire, a building fire alarm system

must work when needed

• Testing ensures correct operation

of alarms in the unlikely event of a

building fire

• Most fire alarms are tested weekly


In the unlikely event of a sanctions violation …

• Sanctions filters mitigate business

risk of low frequency but high

impact events

• Irrespective of the likelihood of a

sanctions violation, businesses

have a regulatory obligation to

ensure that sanctions controls work

• Sanctions Testing ensures correct

operation of the filter and allows

regulations to be met in alignment

with business risk policy

• Many sanctions filters are rarely

tested SWIFT Business Forum Canada - 14 April 2015 7

When was the last time you

tested your sanctions filter?


Banks face a sanctions compliance challenge

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?


Sanctions compliance – balancing priorities


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

with

Sanctions Testing process


Formats

Settings

Lists

Automate • Repeat • Compare • Monitor

Define

test objective

Download

test files

Process

test files

Upload

hit results

View

test results

Common issues identified through testing


• Outdated lists

• Missing entry types

• Missing entries

• Language variants not screened correctly

• Deleted records still screened

Sanctions Lists

Quality

• List scope incorrect or not aligned with bank policy

• Inconsistent implementation across filters

• Entity and alias types screened unnecessarily

Screening

Policy

• Inconsistent screening performance across message types

• Message or file elements not screened properly

• Overreliance on specific fields (e.g. address or country)

Message

Types • Poor fuzzy matching

performance

• Line break, word order, sequences

• Poor performance against particular entries (short or long names, aliases)

• Character set matching issues

Filter

Weakness

Sanctions Testing –Independent In-house testing

Provides:

• Simple and easy on-demand testing

• Automated, scheduled or on-list change sanctions testing

– Without the need for manual intervention in test processes

• A full audit trail including automated report generation and email alerting


Test Creation

Test scope aligned to

compliance policy and

expected outcomes

Trigger Event

Scheduled or

on-list change

test file creation

Sanctions Filter

Test file sent to

sanctions filter for

processing

Outcomes

Alerts sent to users

and report generated

Automated Analysis

Results returned and

automatically analysed

Assessments

GSC 2015 Sanctions Testing – Feb 2015 – Confidentiality: Internal 14

Standard Services

• Standard report and assessment approach

• Workshop & findings

• Considers performance of your own filters

Effectiveness

• Provides assurance that you filter is working

• Captures Risk appetite

• Understand fuzzy performance

Efficiency

• Identifies opportunities for efficiencies / cost reduction

• Quick win efficiency improvements

Peer Assessment Reports

GSC 2015 Sanctions Testing – Feb 2015 – Confidentiality: Internal 15

Available

Q2

2015

Exact Match

How does

my filter

compare?

Peer Upper Range

Peer Lower Range

Fuzzy Performance

Institution

Am I in the

safe-zone?

Comprehensive

• Standard report and assessment approach

• Multiple peer performance dimensions

Helps you understand

• Relative performance

• Policy and technical implementation

• Risk appetite

SWIFT community

• Developed by and created for the SWIFT community

• Industry best practice

• Contribution basis


The KYC Registry

Context “The Relevance of Utilities” Boston 2014


“What areas of financial crime prevention lend themselves to being

addressed through a utility model?”

(% of voters)

In a nutshell…

Single source of correspondent banking

KYC information


7,000+ banks on SWIFT

Trusted third party (member-owned)

Leverage SWIFT membership

process to collect ‘basic’ data

User-provided, user-controlled

Up-to-date and validated

information (through dedicated validation

teams)

A Single Standard

Validated data

A feature-rich Platform

Unique value-add content

Community-lead engagement

The founding principles

www.betterkyc.com

http://www.betterkyc.com/

The KYC Registry: Single source of directly sourced and validated KYC

data for correspondent banking Due Diligence


The KYC Registry

Sta

nd

ard

set

of

data

Featu

re-r

ich

pla

tfo

rm

Valid

ate

d/ Q

A d

ata

Un

iqu

e c

on

ten

t10

Co

mm

un

ity-l

ead

Customer ID

Customer base

Ownership

Management

Compliance /AML

FATCA

95+ data points

30 Documents

Secure

Workflow tools

Notifications

Easy to use

Export/ Report

Comprehensive

Fact-based

Ex-industry

professionals

On average 1

check per data

point and 8 per

document

CDD data

EDD data

SWIFT

Profile for

‘KYCC’

7000+ banks

1.3M+ connections

Development banks

Working Group Big

banks

The KYC Registry – a standard set of KYC data


Category I – Identification of the customer

• Licenses and Proof of Regulation, Certificate of Incorporation etc

• Legal name, auditor, regulator, addresses,

Category II – Ownership and management structure

• Declaration of UBO and shareholders >10%: full names and identifying data

• Board of Directors Lists: full names and identifying data

• Group structure

• MA/AA,Annual Reports, Shareholder listings, certified group and organisational charts

Category III – Type of business and client base

• Revenue breakdown by legal entity

• Operating geographies and customer verticals

Category IV – Compliance information

• Enhanced AML Questions

• AML docs: AML Controls, Wolfsberg Questionnaire, US Patriot Act, response to negative news

Category V – Tax Information

• TIN, GIIN, FATCA information & proof of registration

Join the KYC Registry

• Share your KYC data at no cost

• Pay only for the data you need

• Benefit from our 2015 launch offering

22

SWIFT Business Forum Canada - 14 April 2015

Questions?

23

SWIFT Business Forum Canada - 14 April 2015

Thank you

24

compliance services solutions

Technology

sanctions screening

sanctions compliance

compliance analytics

sanctions regulations

sanctions controls

costeffective compliance

screening customers

screening solution