Identity Matching - Trends and Innovations

Transcription

1 Bangladesh AML Summit 2017 Identity Matching - Trends and Innovations Rahul Oberai Regional Director accuity.com

2 2 Agenda Changing Compliance Regime Challenges faced Identity matching best practices Trade finance perspective Key take aways

3 Accuity focuses on the needs of banks, financial institutions and corporations to ensure efficient AML screening while minimizing regulatory compliance risks Automated Trade Finance Screening 95% of the world s 500 largest banks Strategic relationships 175 years Offices in #AccuityTradeFinance

4 Rise in regional conflicts

5 Financial Warfare $2Tn Congressional report The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations

6 Rising Complexities

7 Compliance Is Expensive, but Noncompliance Can Cost Even More Banks pay out 166bn over six years along with indictments and imprisonment

8 REGULATION Rising Cost De-Risk? Compliance costs Localized conflicts New targets New threats Complexity New domains... Risk policy requirements

9 Institutions Per Accuity research, while the total number of banks globally have increased, the number of correspondent relations have gone down 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 data as of Aug

10 Institutions Asia Pacific is affected by this trend, with a significant drop in correspondent relationships Asia/Pac No. Institutions vs. Corr Relationships No. Banks Corr Relationships (Beneficiary)

11 Identity Matching Developments accuity.com

12 AML Screening considerations Sanctions List EDD/CTC Dual-use Goods PEPs Anti-social Forces Private List Manager Vessels Adverse Media Private Lists Sea Ports Scrubbing Engine (Rules + Algorithm) KYC On-boarding Customer Accounts Payment s SWIFT & NRB Trade Finance Review Management Policy Process - Frequency

13 Current Developments - Data 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

14 Current Developments - Process Automated Screening API s Facilitate Single View of Risk Traceability

15 Some important considerations 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

16 Identity Matching for Trade Finance accuity.com

17 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 Internation al TBML report Dec.2009 US FINCEN SAR/TBML Advisory Feb APG TBML Typologies Report Jul UK FCA Thematic Review: control of financial crime risks in trade finance Jul JMLSG Guidance Trade Finance Nov MAS AML CFT Controls in Trade Finance Oct HKAB Guidance paper on TBML Feb. 2016

18 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

19

20 We are being asked by our auditors to explain the combination of chemicals to create explosive devices. We are just bankers, not chemists! TEA Shampoo Triethanolamine Mustard Gas Bicycles Carbon Fiber Rocket Fuselage Instant Coffee Lyophilizer Biological Weapon

21 Your correspondent partners in emerging markets are coming under greater scrutiny on AML controls focused on trade finance 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 dualuse goods in trade transactions, taking into account other relevant red flags in a transaction. Guidance Paper on Combating Trade-based Money Laundering 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 We found that banks had generally developed effective controls to ensure they were not dealing with sanctioned individuals and entities. However, policies, procedures and controls to counter money laundering risk were generally weak and most banks had inadequate systems and controls over dual-use goods. Banks control of financial crime in trade finance 2

22 Screening Areas for a Bank KYX (X = Everyone!) Retail Banking Corporate Banking Investment Banking Private Banking Trade Finance FI Department 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

23 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

24 Thank You! Rahul Oberai Regional Director - APAC south rahul.oberai@accuity.com