bangladesh aml summit 2017 identity matching -...
TRANSCRIPT
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Identity Matching - Trends and Innovations
Rahul Oberai – Regional Director
Bangladesh AML Summit 2017
Agenda
Changing Compliance Regime
Challenges faced
Identity matching best practices
Trade finance perspective
Key take aways
2
Accuity focuses on the needs of banks, financial institutions and corporations to ensure efficient AML screening while minimizing regulatory compliance risks
Offices in
Strategic relationships
95% of the
world’s 500 largest banks
175 years
Automated Trade Finance
Screening
#AccuityTradeFinance
Rise in regional conflicts
Financial Warfare
$2TnCongressional report “The Cost of Iraq, Afghanistan, and
Other Global War on Terror Operations”
Rising Complexities
Compliance Is Expensive, but Noncompliance Can Cost Even More
Banks pay out £166bn over six years along with indictments and imprisonment
New targets
New threats
New domains
Complexity
Localized conflicts
Compliance costs
Risk policy requirements
...
RE
GU
LA
TIO
NRising Cost – De-Risk?
Per Accuity research, while the total number of banks globally have increased, the number of correspondent relations have gone down
0
50000
100000
150000
200000
250000
300000
350000
400000
41000
42000
43000
44000
45000
46000
47000
2013 2014 2015 2016
Ins
titu
tio
ns
Total No. Institutions vs. Total Corr Relationships
Total No. Institutions Total Corr Relationships
Institutions include Depository Financial Institution, Commercial Bank, Savings Bank, Savings & Loan Association, Credit Union, Industrial
Bank, Private Bank, Thrift & Loan, Cooperative Bank, Deposit Taking Institution, Retail Bank, Wholesale Bank, Building Society
Source: Accuity Global Payments File. 2016 data as of Aug 26 2016
Asia Pacific is affected by this trend, with a significant drop in correspondent relationships
0
5000
10000
15000
20000
25000
30000
7800
8000
8200
8400
8600
8800
9000
2013 2014 2015 2016
Inst
itu
tio
ns
Asia/Pac No. Institutions vs. Corr Relationships
No. Banks Corr Relationships (Beneficiary)
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Identity Matching Developments
Review Management
KYC
On-boarding
Customer
AccountsPayment’s SWIFT
& NRBTrade Finance
Private
List
Manager
Sanctions
List
PEPs
Adverse
Media
EDD/CTC
Anti-social
Forces
Private Lists
Dual-use
Goods
Vessels
Sea Ports
Scrubbing Engine (Rules + Algorithm)
Policy – Process - Frequency
AML Screening considerations
• Single warehouse of reference data –
Adding datasets centrally
• From lookup to data push – Pro-active
Correspondent Banking DD
• Outsource research to save – Enhanced
Data
• Query specific datasets – Reducing False
Positives
Current Developments - Data
• Automated Screening
• API’s – Facilitate Single View of Risk
• Traceability
Current Developments - Process
• Independent Review – Ask an reputable company/auditor to
review your current process and policy for KYC screening
• Training – Ensure the management and teams focused on KYC
screening understand the importance of this function
• Filtering solutions – There are a number of leading local and
international vendors who provide good software that will
automate KYC and account screening for the banks
• Sanction Data – The international sanction lists such as UN,
EU, OFAC are changing all the time, make sure you have the
correct mechanism in place to have the latest sanction data
• Good Customer Data – You need manage quality customer data
to have an effective KYC program. Garbage in = Garbage out
Some important considerations
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Identity Matching for Trade Finance
A global standard is emerging in identifying trade-based money laundering risks… but we’re not fully evolved yet
FATF
Trade-based Money
Laundering report
2006
The Wolfsberg
Group Trade Finance Principles
2009
EAG WG International TBML report
Dec.2009
US FINCEN SAR/TBML
Advisory
Feb. 2010
APG TBML Typologies
Report
Jul. 2012
UK FCA Thematic Review:
control of financial
crime risks in trade financeJul. 2013
JMLSG Guidance
Trade Finance
Nov. 2014
MAS
AML CFT Controls in
Trade Finance
Oct. 2015
HKAB
Guidance paper on
TBML
Feb. 2016
Dual-use Goods include a wide range of
goods that are designed for commercial
applications but can also have military
applications or potentially be used as
precursors or components of Weapons
of Mass Destruction
Carbon Fiber
Shampoo
Bicycles
Instant Coffee
Mustard Gas
Rocket Fuselage
Biological Weapon
Lyophilizer
Triethanolamine
TEA
“We are being asked by our auditors to explain the combination of chemicals to create explosive devices. We are just bankers, not chemists!”
“We found that banks hadgenerally developed effectivecontrols to ensure they werenot dealing with sanctionedindividuals and entities.However, policies, proceduresand controls to countermoney laundering risk weregenerally weak and mostbanks had inadequatesystems and controls overdual-use goods.”
Banks’ control of financialcrime in trade finance
“Banks should…determine
whether the underlying
goods financed are
embargoed goods and
there should be special
attention paid to dual-use
goods”
Guidance on anti-money
laundering and
countering the financing
of terrorism controls in
trade finance and
correspondent banking
Your correspondent partners in emerging markets are coming under greater scrutiny on AML controls focused on trade finance
2
“While this is a complex area,
AIs should nevertheless have
measures in place, as part of
their risk-based systems and
controls that can assist in the
identification and escalation
(for further review) of dual-
use goods in trade
transactions, taking into
account other relevant red
flags in
a transaction.”
Guidance Paper on
Combating Trade-based
Money Laundering
Retail Banking
Corporate Banking
Trade Finance
Investment Banking
Private Banking
FIDepartment
• The KYC requirements in these area’s are very similar, with the all clients having to be screened against sanction & PEP lists
• All beneficial owners are required to be identified, with Corporate Banking senior management must be identified and screened
• In Private Banking banks typically conduct EDD screening, as many of these clients are typically High Net Worth Individuals and can pose a greater risk
• Trade finance are required to check all parties involved in the transaction, this extends to identifying the vessel, the route of the vessel, the banks, companies and all persons
• As part of the Due Diligence Process, the Head of FI is required to screen all correspondent banks against sanctions and PEP lists, this is extended to the senior management of this group
Screening Areas for a Bank – KYX (X = Everyone!)
Key takeaways:
• It will get complicated!
• There is a cost of non compliance that extends
beyond just a monetary value
• De-risking is something that has a significant
economic impact to a country
• Leveraging on technology is the only option to
find a balance between rising compliance costs
and margins
Thank You!
Rahul Oberai
Regional Director - APAC south
[email protected]://accuity.com/accuity-insights-blog/