SWIFT Financial Crime Compliance Initiatives - Luc Meurant

SWIFT Business Forum

Frankfurt 2015

Update on SWIFT’s Financial Crime

Compliance initiatives

Luc Meurant, Head of Banking Markets and

Compliance Services, SWIFT

Frankfurt, 22 April 2015

A community issue calling for a community

solution …

Financial crime is top of

the agenda for banks

All geographies / All types

of players impacted

Significant costs

at stake….

... Yet no competitive

advantage for banks

Lots of duplication…

for universal challenges

(opportunity for scale economies)

Community-inspired financial crime

compliance solutions

Sanctions

Screening

Hosted solution

for cost-effective

compliance with

sanctions

regulations.

Sanctions

Testing

Maximise the

effectiveness

and efficiency of

your sanctions

environment.

The KYC

Registry

One global

source of KYC

information for

correspondent

banking.

Compliance

Analytics

Enhanced

understanding &

management of

financial crime-

related risk.

So far, 4 new services with a

focus on correspondent banking

Financial Crime Compliance

SANCTIONS KYC ANALYTICS

Financial Crime Compliance Utility

Securities

Industry?

Corporates?

GO DEEPER GO FASTER GO BROADER?

CORRESPONDENT BANKING

- Going forward

More on SWIFT Sanctions Screening

service

Sanctions Screening overview

Your institution

Your correspondents

Hosted and

managed

screening

engine

Daily updates

from

32 lists

+ private lists

Real-time

screening

No

additional

footprint

325 users

107 countries

17 central banks

18 branches

of Tier 1

All traffic

screening

option

introduced

Fine-

tuning

rules

Customer/

Name

Screening

Sanctions Screening roadmap

More on SWIFT Sanctions Testing

service

Effectiveness

• Provide assurance that your filter

works

• Measure system’s fuzzy

matching performance

• Assess coverage of sanctions lists

• Align screening system to your

risk appetite

Efficiency

• Reduce false positives

through iterative testing

• Build optimisation tests into

your processes

• Understand parameter changes

• Manage and tune rules and “good-

guy” lists

Testing Meeting regulatory demands

Tuning Managing cost and resources

Sanctions compliance – balancing priorities

with

Formats

Settings

Lists

Automate • Repeat • Compare • Monitor

Sanctions Testing process

Define

test objective

Download

test files

Process

test files

Upload

hit results

View

test results

Peer assessment being

launched in Q2 2015

Sanctions – Other ideas being considered

• Interest is growing to consider the development

of a fully-fledged Industry Sanctions Utility:

• Built as a fully-fledged and modular service offering

(eg client/transaction screening, list management,

quality assurance, standards, reporting, services)

• Qualification work on-going (eg, partnerships,

phasing, economics)

More on SWIFT KYC Registry initiative

In a nutshell… Single source of correspondent banking KYC information

7,000+ banks on SWIFT

Trusted third party (member-owned)

Leverage SWIFT membership

process to collect ‘basic’ data

User-provided, user-controlled

Up-to-date and validated

information (through dedicated

validation teams)

A Single Standard

Validated data

A feature-rich Platform

Community-lead engagement

Unique value-add content

The founding principles

A standard set of KYC data

Category I - Identification of the customer Licenses and Proof of Regulation, Certificate of Incorporation, et cetera

Legal name, auditor, regulator, addresses

Category II – Ownership and management structure Declaration of key UBO and shareholders : full names and identifying data

Board of Directors Lists: full names and identifying data

Group structure

Annual Reports, Shareholder listings, certified group and organisational charts

Category III – Type of business and client base Revenue breakdown by legal entity

Operating geographies and customer verticals

Category IV – Compliance information Enhanced AML Questions

AML docs: e.g. AML Controls, Wolfsberg Questionnaire, US Patriot Act

Category V – Tax information TIN, GIIN,FATCA information & proof of registration, documentation

Identify areas of risk and demonstrate

your declared behaviour: the challenge

Know

Your

Customer’s

Customer

And the Answer: The SWIFT Profile

19

YOUR

CUSTOMER

CUSTOMER’S

DIRECT EXPOSURE

CUSTOMER’S

INDIRECT

EXPOSURE YOU

PUBLISHER OF

THE SWIFT

PROFILE

CONSUMER OF

THE SWIFT

PROFILE

COUNTRY OF YOUR

CORRESPONDENT’S

COUNTERPARTY

COUNTRY OF

ORDERING /

BENEFICIARY

PARTY’S BANK

KYC Registry

ALREADY MORE THAN 350 INSTITUTIONS REGISTERED

(IN MORE THAN 100

COUNTRIES)…

… AND COUNTING

HOW ABOUT YOU?

KYC – Other ideas being considered

• A selective extension of the KYC Registry to new

market segments (eg securities, corporates),

contemplating partnerships

• A Market place on top of the KYC Registry to allow

third-party providers to offer services through the

Registry

• A richer RMA application, linked to the Registry

More on Compliance Analytics

Introducing Compliance Analytics Leveraging SWIFT traffic data for risk monitoring

Single Source

Identify

Global aggregated

views

Quantify Benchmark

vs totals

Monitor

Event driven Alerting

Drive

Focus on high risk Investigate

Visual analytics

Report

Interactive generation

Look back

Retrospective reviews

Example: Specific Correspondent Risk assessment Where are payments originating from? Ending up in?

1. What are the higher risk

originating countries?

2. Which of my affiliates are

involved in these flows?

3. What are the ultimate

beneficiary countries?

Analytics – Other ideas being qualified

• Enrichment with additional data and flows (possibly

non-SWIFT)

• Extended statistical and analytic capabilities

• FATF16 compliance module

• Contemplating the evolution toward a fully-fledged

AML solution, possibly in partnership

26

More on Compliance for

Securities Market

Compliance for Securities?

• Significant challenges in the industry (eg Adam Szubin’s

comments on Omnibus accounts)

• Challenges for SWIFT and its community:

– Diverging community feedback

– Multiple overlapping initiatives

• Yet, strong commitment to help the industry:

– New dedicated Securities Compliance Working Group

– Tactical extension of existing services already being worked out

– Bolder moves will be qualified

Thank you