KYC Registry; solution update SWIFT Business Forum – New York

Carolyn Vick, Executive Director, JPMorgan Chase

Paul Taylor, Head of Business Development, SWIFT

3 March 2015

Financial Crime Compliance Roadmap

Standards

Data repositories

Traffic analysis

Quality assurance

Processing services

Sanctions KYC AML

Sanctions list

management service

KYC Registry

Compliance Analytics

Sanctions Testing

(testing / tuning of transaction & client systems) AML testing & tuning

FATF 16 information quality

Client/Name screening

Sanctions Screening Traffic Restriction (RMA)

Live Development Qualification Exploration

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The KYC Registry

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The KYC Registry: A Community initiative

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Promoting collaboration and driving community engagement

Today’s market: An unprecedented challenge to comply with

KYC requirements

The

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

Increase in pressure to

reconcile & ‘de-risk’

Increase in AML/KYC

fines (>$3 billion/2 years)

Increase in KYC

complexity: FATF/FATCA

As a result the industry has witnessed a new development: the growth of the KYC

‘utility’

The Cost of FI KYC is becoming prohibitive

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How does it work?

A “Requester” of the information will log into the repository and send a request to the legal entity of

interest – the “Submitter” – to enter their information into the KYC repository

— There is no fee for the Submitter to use the system

The Submitter will enter the requested data and relevant evidentiary documentation

The KYC Registry ops team will review the data and documentation to validate that the information is

accurate and the documents support the information provided

— This will include searches in public databases

— Periodic refreshes of the records will be completed by the repository

Once a Submitter has created a record in the system, any Requester – including the original

requesting organization – will have to ask permission to access the Provider record and documents

— A Requester can only see that there is a record for a particular legal entity once it has been

created; no one can see the details and access the documents until the Provider has permissioned

them to do so

The Requester will pay to retrieve the information and download the documents

Baseline requirements are to be collected for all banks providing information

If baseline information cannot be validated by evidentiary documentation, SWIFT will not publish it

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New

Onboarding

Request

New

Onboarding

Request

Requirements

Engine:

Product, Service,

Booking location

Data Extract:

•Name: Alpha Co.

•Address: 1 Newville

Client Onboarding Process

Current

State

Future

State

KYC Registry

SWIFT Profile in a nutshell

YOUR

CORRESPONDENT

COUNTRY OF YOUR

CORRESPONDENT’S

COUNTERPARTY

YOUR

CORRESPONDENT’S

DIRECT EXPOSURE

YOUR

CORRESPONDENT’S

INDIRECT EXPOSURE

PUBLISHER OF THE

SWIFT PROFILE

CONSUMER OF THE

SWIFT PROFILE

YOU

COUNTRY OF

ORDERING / BENEFICIARY

PARTY’S BANK

WHAT IT IS

The purpose of the SWIFT Profile is to bring transparency on a bank’s

activity over the SWIFT network by indicating whether this bank has

established relationships in FATF high risk or sanctioned jurisdictions.

It addresses the challenge of Know Your Customer’s Customer.

KEY BENEFITS

• Provides unique insights into bank’s activity, based on data

inaccessible outside the institution who owns the data

• Substantiates the declared behaviour by relying on factual data

provided by a neutral third party

• Promotes a pro-active approach in the assessment of existing

relationships and fosters continuous monitoring of exposure

• Allows focusing the dialogue with your correspondent on highest

risk areas

WHAT RISKS IT MITIGATES

Omission or inability to identify correspondents, or ordering/beneficiary

institutions located in high risk or sanctioned jurisdictions

Exposure beyond risk appetite

Decision to enter a correspondent relationship is based on incomplete

or inaccurate information

Declared behaviour does not reflect actual business relationships

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We’ve come a long way..!

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KYC Registry31 Dec 2014

26 entities

in 18 countries

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KYC Registry31 Jan 2015

69 entities

in 36 countries

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KYC Registry24 Feb 2015

158 entities

in 74 countries

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Ultimately – to improve the client experience

Reduce administrative burden on front office – repositories will be requesting data and documents

from clients, not front-office staff

Cost management to deal with increasing regulation and regulatory requirements

—Operational efficiencies, market efficiencies and potential for document management

standardization and exchange

—Increase productivity without increasing headcount – one source for all of the base data

Potential to reduce the onboarding and account opening time for certain products/businesses

Data will be verified and validated based on documentation within the repository

Promote digital standards (electronic document submission, forms-based documents, electronic

signatures) as a replacement for hardcopy document management

SWIFT is under strong oversight and is industry-owned

Data ownership/security

― A user will only be able to see that there is a record for a legal entity; access to details and

documents has to be “permissioned” by the data owner

No cost to providers of information; only cost is to users that want access to the data and docs

Benefits of SWIFT KYC Registry

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And what's next?

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Working Group member banks are seed clients for the initial release of the repository

— We submitted information for the JPMorganChase Bank NA and JPMorgan AG

Working with Legal and Compliance to address transparency for our clients of data sharing across

JPMorgan legal entities

JPMorgan have formally signed on subsequent to the numbers being generated above

JPMorgan will expect that all of our correspondent banks/agent banks/network banks will use the SWIFT

KYC Registry for holding and maintaining the relevant KYC/AML information

We (and some of the other Working Group banks) are establishing a central team/contact for incoming

requests for KYC and tax information on JPMorgan legal entities

― Establishing governance on validating requests, relationships behind the requests, or when access to

the data should be revoked

Sourcing tax forms from the Registry is not currently possible

― There is insufficient guidance from IRS to enable us to access and download documents from

repositories

― There is an option for an MOU, providing that the tax form is electronically generated

― This is not unique to SWIFT, but applies to all third party providers of tax forms

Integration with our internal KYC processes

Pilot with SWIFT on KYC remediation

Moving Forward

From KYC Registry to KYC Marketplace

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KYC Marketplace

RISK DASHBOARD

TRANSLATION SERVICES

THIRD PARTY DATA

OWNERSHIP STRUCTURE

RMA REPORTS NOTIFICATIONS

APIs

Q&A

?

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Please provide us with your feedback!

• Kindly complete the survey form and submit upon exiting

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SWIFT Business Forum New York

2015

What’s next: Product Showcases

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Thank you