Sanctions screening as a serviceSibos 2010, Amsterdam

Andy Schmidt, TowerGroup

Nicolas Stuckens, SWIFT

Agenda

• Andy Schmidt, Research Director – Global Payments, TowerGroup

• Nicolas Stuckens,Manager AML & Sanctions initiatives, SWIFT

Pressure from Multiple Fronts on Financial Institutions Regarding Anti-Money Laundering (2010)

Source: TowerGroup

Regulatory Pressure• Mandatory compliance• Global focus on AML and counter-

terrorist financing• Strict(er) rules and enforcement• Pressure to retain headcount and focus

on AML, fraud, and compliance

Fraudsters• Electronic payment types are

proliferating• Identity theft is on the rise• US dollar is again the preferred

currency of drug traffickers• Banks are expected to be

distracted for some time

Internal Pressure• AML is not a differentiator • Banks are strapped for capital and

liquidity • Banks are under pressure to

increase revenue and streamline the business

• Midtier and de novo banks lack AML sophistication

Regulatory

FINANCIAL INSTITUTION

Internal

Frau

dste

rs

Global Areas of Noncompliance with the Financial Action Task Force on Money Laundering (2005–09)

Source: Financial Action Task Force for Money Laundering, TowerGroupNote: DNFBP = designated non-financial businesses and professions. * FATF Special Recommendations on Terrorist Financing.

Anti-Money Laundering Processes that can be Automated (2010)

Note: AML = anti-money laundering, FIU = financial intelligence unit, PEP = politically exposed person, SAR = suspicious activity report.

Customer Due Diligence:“Know Your Customer” (KYC)

• Customer verification

– Collecting customer information

– Identifying wrongdoers and PEPs

• Customer risk scoring

• Customer life-cycle maintenance

AML Management • Provision of regulatory updates

• AML awareness training

Case Management andRegulatory Reporting Systems

• Tracking, investigating, andfollowing up on alerts

• Filing SARs with FIUs

• Maintaining customer information for 5 years after account closing

Transaction Monitoring

• Screening for suspiciousbehavior

• Screening transaction counterparties andbeneficiaries

Source: TowerGroup

Large Banks vs. Small Banks: Same Planet– Different Worlds

Small banks often lack the tools and resources needed to combat money laundering despite similar levels of regulatory pressure

Agenda

• Andy Schmidt, Research Director – Global Payments, TowerGroup

• Nicolas Stuckens,Manager AML & Sanctions initiatives, SWIFT

Your institution

• A combination of best of breed:– Filter application– Sanctions List update service– Operational excellence

• Centrally hosted and operated by SWIFT• Real-time filtering service of FIN messages• No local software installation & integration project

• A combination of best of breed:– Filter application– Sanctions List update service– Operational excellence

• Centrally hosted and operated by SWIFT• Real-time filtering service of FIN messages• No local software installation & integration project

Sanctions screening service overview

Your correspondents

Roles & responsibilities

User• Select MTs to filter

• Select public sanctions lists to apply

• Review alerts & decision

• Define internal roles, responsibilities & escalation path

• Sign off on service description

SWIFT• Manage filter

• Manage lists (acquisition, test & upload)

• Notify users in case of alerts

• Provide audit trail

• Security, reliability, business continuity

• Independent Audit review

notification

Your institution

How does it work?

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

Your correspondents

Alertsabortnotif.

Your institution

In case of true hit on an alert

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

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 correspondents

special queue

Alerts

Your institution

In case of true hit on an alert

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

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

Your correspondents

Benefits

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

• Security

• Confidentiality• Protected access• Message integrity

• Resilience • Service Level Agreement • Business continuity• Disaster recovery programme

• Operational excellence• 24x7 support • Local language support• Quality checks

A service provided by

Thank you