Sanctions screening
as a service
Sibos 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)
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
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
Fraudsters
FINANCIAL INSTITUTION
Internal
• 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
Source: TowerGroup
Global Areas of Noncompliance with the Financial
Action Task Force on Money Laundering (2005–09)
Source:
Note:
*
Financial Action Task Force for Money Laundering, TowerGroup
DNFBP = designated non-financial businesses and professions.
FATF Special Recommendations on Terrorist Financing.
Anti-Money Laundering Processes that can
be Automated (2010)
Customer Due Diligence:
“Know Your Customer” (KYC)
• Customer verification
– Collecting customer information
– Identifying wrongdoers and PEPs
• Customer risk scoring
• Customer life-cycle maintenance
Transaction Monitoring
• Screening for suspicious
behavior
• Tracking, investigating, and
• Screening transaction
counterparties and
beneficiaries
Case Management and
Regulatory Reporting Systems
following up on alerts
• Filing SARs with FIUs
• Maintaining customer information
for 5 years after account closing
AML Management
• Provision of regulatory updates
• AML awareness training
Note: AML = anti-money laundering, FIU = financial intelligence unit, PEP = politically exposed person, SAR = suspicious activity report.
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
Sanctions screening service overview
Your institution
Your correspondents
• 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
Roles & responsibilities
User
SWIFT
• Select MTs to filter
• Select public sanctions lists to
apply
• Review alerts & decision
• Define internal roles,
responsibilities & escalation path
• Sign off on service description
• Manage filter
• Manage lists (acquisition, test &
upload)
• Notify users in case of alerts
• Provide audit trail
• Security, reliability, business
continuity
• Independent Audit review
How does it work?
Your institution
notification
Your correspondents
Messages resulting in alerts are temporarily held in the filter and
notified to the bank for investigation
In case of true hit on an alert
Your institution
abort
notif. Alerts
Your correspondents
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
In case of true hit on an alert
Your institution
special
queue
Alerts
Your correspondents
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
Benefits
A service provided by
•
•
•
•
•
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
Thank you