aml webinar: sanctions risk - what's the problem?
TRANSCRIPT
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SANCTIONS RISK – WHAT’S THE PROBLEM?
WEBINAR
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PRESENTERS:
Chris ParryStrategic Forecaster and Risk ExpertConsultant to Thomson Reuters
Andrew Simpson Chief Operating Officer CaseWare Analytics
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SANCTIONS RISK – WHAT’S THE PROBLEM• Direct risk
• Indirect risk
• Multiple sanctions regimes
• Multi-national exposure
• Trading risk
• Links to other forms of crime
• Reputational risk
• Legality and legitimacy
• Predatory US enforcement
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SANCTIONS REGIMES – THEIR CHARACTER AND EFFECTIVENESS
• Political purpose – financial and commercial means
• Rarely comprehensive
• Normally target regime is affected less than population
• Black economy
• Rarely more than a holding action
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EVASION AND LOOPHOLES
• Partial regimes
• Barter
• Trafficking
• Opaque beneficiary and ownership chains
• Window-dressing, false accounting and shadow documentation
• Dual-use goods
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IDENTIFYING THE CULPRITS
• The usual suspects – the state, state-based companies, intermediate facilitators and financial institutions
• Connections to other forms of financial crime – counterfeiting, money-laundering, terrorist financing
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IDENTIFYING THE CULPRITS
• Trafficking
• Informal networks and money transfers
• Data-bases and watch-lists
• Interpretative analysis
• Insiders and whistleblowers
• Your own company’s deliberate policy?
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THIRD PARTIES AND PROXIES
• Other states
• Shell companies
• Shell banks
• Legal entities – Panama Papers
• Legitimate entities
• Long-term agency
• Watch out for your partners –and their partners
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RUSSIA
• Personal
• Sectoral
• State-based financial institutions
• State security and governmental institutions
• Diaspora risk
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IRAN
• Current status of sanctions
• Power in Iran
• Relationship with China
• Offshore and onshore risk
• Links to terrorism
• Diaspora risk
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IMPLEMENTING A COMPREHENSIVE SANCTIONS RISK APPROACH
• Continuous process
• Understanding the context –intelligence and interpretations
• Reducing false positives –optimum data points
• Network analysis –individuals and companies
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IMPLEMENTING A COMPREHENSIVE SANCTIONS RISK APPROACH
• Data-sets for screening risk
• End-to-End screening of networks and supply chains
• Enhanced Due Diligence
• Outsourcing screening?
• Shared risk – Cooperation and collaboration
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IMPLEMENTING A COMPREHENSIVE SANCTIONS RISK APPROACH
• Relationship with OFAC, regulators and enforcers
• Everybody’s Business
• Dealing with Vulnerabilities
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THREATS TO THE EFFECTIVENESS OF FUTURE REGIMES• Partial regimes
• Failing and flailing states
• Regulatory and legal complexity
• Synthetic currencies and block chain technologies
• Alternative SWIFT system
• Shadow financial processes
• Beyond-third-party agents
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INNOVATION THAT WILL HELP
• Big data applications – multi-sector analysis and bio-recognition
• Regulatory and legal algorithms
• Artificial intelligence
• Machine learning
• Block chain (again)
• Regulatory kitemarks
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SANCTIONS SCREENING AUTOMATION• Automation Options
• Use cases across industries:• Banking Scenario• Money Services Business• Fintech• Gaming• Supplier/Vendor Risks
• Enrolling the entire business
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AUTOMATION OPTIONSAd-hoc searches
Seco
ndar
y Id
entif
iers
Prim
ary
Iden
tifie
rs LAST NAME
LOW QUALITY ALIASESFIRST NAME
ALIASES
E/I
ALTERNATIVE SPELLING
AGE
PLACE OF BIRTH
DOB
DOBS
DECEASED
IDENTIFICATION NUMBERS
PASSPORTS
SSN
LOCATIONS
CITIZENSHIP
COUNTRIES
AGE DATE (AS OF DATE)
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AUTOMATION OPTIONS
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AUTOMATION OPTIONSPeriodic/Continuous Screening
• Why?• Customer information may have changed• Watch-list data may also have changed
• Frequency?• Depends on what other risk management exists• Most companies do monthly or quarterly
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AUTOMATION OPTIONSReal Time Screening
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MANAGING FALSE POSITIVES• Use best data available
o Countryo Date of birth/Age
• Not all sanction lists may be relevant • Exclude parts of world that are not applicable• Use native character sets• Use case management with machine learning
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HANDLING NATIVE CHARACTER SETS
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MACHINE LEARNING
Screen Customers
Potential Hits
Users Take Actions (e.g.
Flag False Positives)
Machine Learning Applied
Refine Matching
Algorithms and Case
Management
Case Management Learning
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BANKING
• Screen during on-boarding:o Consider interfacing with a screening API
• Periodic screening:o Apply customer segmentation
• Real-time for cross-border transactions
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MONEY SERVICES BUSINESSES
• Not always required
• Profile customers that you may need to screen. High risk customers that are involved in:o Structuringo Smurfingo Flipping
• Use the country risk as well to narrow the focus
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FINTECH• Integrate with a screening API
Infographic prepared by Let’s Talk Payments
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GAMING
• Screen at onboarding
• Periodic Screening of Patrons
• Use risk profiling to narrow focus
• May screen gaming to bank account transfers in real time
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END TO END SCREENING FOR SUPPLY CHAIN• Segment suppliers by risk profile:
o Locationo Items being suppliedo Dependencyo Volume of business
• Screen at onboarding
• Periodic screening to assess any changes in risk
• Correlate to transaction monitoring
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ENROLLING EVERYONEWorkflow and Case Management