Best Practices for Compliance – Sanction · PDF fileBest Practices for Compliance – Sanction Screening Sean ... Trust-In a competitive market banks and FI’s cannot ... A trade

3rd Annual Anti Money Laundering Summit3rd Annual Anti Money Laundering Summit Mumbai , 23 October 2013

Best Practices for Compliance –pSanction Screening

Sean Norris, CAMS APAC Regional Manager

Objectives

To stress the importance of screening as an essential part to your AML/CFT programessential part to your AML/CFT program

Provide an overview of screening best practiceProvide an overview of screening best practice

Provide some detail on things to consider when developing an effective screening program

Agenda

Introduction to Accuity

Why do Financial Institutions need to screen?

Best Practices for Screening

Key takeaways

Introduction to Accuity

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Our Pedigree in Compliance solutions

The leading provider of data, software and services that allow organisations to maximise efficiency and facilitate complianceorganisations to maximise efficiency and facilitate compliance

First to market and provider of AML screening solutions since 1993

A broader global footprint and greater expertise than any vendor in the market with over 2300 organisations using our compliance solutions

The world’s experts in false positive reduction

Compliance data collection and maintenance processes areCompliance data collection and maintenance processes are routinely audited for accuracy

Offices in Abu Dhabi . Boston . Chicago . Hong Kong . London . New York . San Diego . Sao Paulo . Seoul . Shanghai . Singapore . Sydney

Endorsements, Quality, and Accolades


Why do Financial Institutions need to screen?

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Why do we have to screen our customers?

Regulatory Requirements

RBI Banks are therefore advised to develop suitable mechanism throughRBI - Banks are, therefore, advised to develop suitable mechanism through appropriate policy framework for enhanced monitoring of accounts suspected of having terrorist links and swift identification of the transactions and making suitable reports to the Financial Intelligence Unit – India (FIU-IND) on priority

UN - FI’s should monitor wires for those involving parties designated by the United Nations Security Council and take freezing actions or otherwise prohibit the transactions from occurringthe transactions from occurring

OFAC - Prohibit transactions and require the blocking of assets of persons and organisations that appear on one of a series of lists that OFAC issues periodically

All Banks have a responsibility and obligation to screen accounts and payments against major sanctions lists to prevent Terrorist Financing

Why do we have to screen our customers?

Financial Penalties

Fines Over the last 3 years banks have been fined over US$ 1 billions in finesFines - Over the last 3 years banks have been fined over US$ 1 billions in fines

Share Price - Announcement’s of poor screening controls can have a significantShare Price Announcement s of poor screening controls can have a significant impact on the institutions share price

Remediation - The internal cost for a bank to have independent auditors review the gaps and analysis of why payments are not being screened does cost substantially more than the fines itself

Incorrect Sanctions Screening will cost the bank money in the long term without a proactive and thorough screening program in place

Trends of Fines and Penalties 2003 - 2012

Reputational Damage

Trust - In a competitive market banks and FI’s cannot afford to create doubt regard its integrity in any market place

Lost customers - A bank will lose customers and share holders if trust and credibility in tarnished

Bad press - Creates doubt for investors and customers which will in turn affect the banks performance. Even the families and victims will look for

ti f b k i li t d i l f l t ti t ti dcompensation from banks implicated in unlawful transactions to sanctioned entities

No News in Good News, ensure you have the correct controls in place to protect your institution from reputational damage

Best Practices for Screening

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Best Practice - Screening Customers and Payments

What needs to be screened?

New customersNew customers

Existing customers

SWIFT MSWIFT Messages

Inward NRI Remittances – Online, Foreign branches, Exchange House and other such partnersExchange House and other such partners

Trade Documents – Bill of Lading, Commercial Invoice etc.

The first step to ensuring an effective payment screening programme is to recognise that terrorist’s are funded through international payments


When do we do screening?

New customers - Before Account OpeningNew customers - Before Account Opening

Existing customers - Periodically to adhere to changes in the Sanction lists

Outward SWIFT Messages - Before creation of MT103

Inward SWIFT Messages and NRI Remittances - Before creditInward SWIFT Messages and NRI Remittances - Before credit of funds to beneficiary

Trade Documents - Before creation of MT700



Screening process and policy

Operations - Depending on the banks international footprintOperations - Depending on the banks international footprint multiple lists may be required in the screening process to comply with specific jurisdiction requirements

Policy - The bank must have a clear and documented policy and process for sanction screening across all processes.



Tools to assist with screening

Independent Review - Ask a reputable company/auditor to p p p yreview your current process and policy for KYC screening

Filtering solutions - There are a number of leading local and i t ti l d h id d ft th t illinternational vendors who provide good software that will automate screening for the banks

Sanction Data - The international sanction lists such as UN EUSanction Data The international sanction lists such as UN, EU, OFAC and HMT are changing all the time, make sure you have the correct mechanism in place to have the latest sanction data

Training - Ensure the management and teams focused on screening understand the importance of this function



MT 700 – Trade Finance

Vessel - OFAC requests that banks screen against Vessel data q gthat can cause high rates of false positives

Ports - Where is the vessel stopping along the route, is there a t ti l f ti ti d t ipotential of supporting sanctioned countries

Dual Use Goods - What are the goods carried by these vessels and do they pose a threat for the development of WMDand do they pose a threat for the development of WMD

Front End - It is more operationally effective to screen these data elements before a MT700 is created


A trade is worth a thousand checks and often times must be done on many documentstimes must be done on many documents

Current processes are hard to manage, filled with time wasting manual entry and there is a lack of a central audit trail

There may be many questionable parties that you have to check using many toolsyou have to check using many tools

Shipper Use your compliance department’s watch list screening/lookup tool

SendingBank

BeneficiaryBank

Buyer/Consignee

Ship Used for Transport

Port of Loading

Port of Discharge

Use a free worldwide search enginep gDischarge search engine

Manually search against restricted

goods lists

Goods and type of goods

Using many tools equates to a lack of oversight and proof• What if a particular field wasn’t checked? • What proof is there that all fields were checked properly?

What if…these checks could all be done from one tool?one tool?

/Shi Buyer/Consignee

SendingBank

BeneficiaryBank

Shipper

Port of Loading

Port of Discharge

Ship Used for Transport

Use a free worldwide search engine

Manually search against restricted

Goods and type of goods g

goods liststype of goods

One tool will save you time in manual entry and provide a centralised audit trail

Trade Screening requires specific sets of data, below are what to watch out for:

H d

SyriaCountry of

Sierra LeoneFlag

HondurasManaging

Companies

yEconomic Benefit

IMO: 7126114

DONNA KHADIJEH STVENSLAND ? OSLOBANK ? SCOL ACTON ?

OSTEBANK?

Key Takeaways

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Key TakeawaysKey Takeaways

Sanction screening is powerful and essential tool toSanction screening is powerful and essential tool to combat terrorist financing

Senior management has to understand the implicationsSenior management has to understand the implications of not screening appropriately

Ensure you get the best expertise when developing a i t l ith h iscreening program to comply with ever-changing

regulations and to obtain efficiencies without reducing the risk

ContactsContacts

Sean NorrisSean NorrisRegional Manager – APACEmail: [email protected]: +65 9232 7756Mobile: +65 9232 7756

Bharath VelloreKey Account Manager – South AsiaEmail: [email protected]: +65 97233346
