SWIFT Compliance Services

SWIFT Compliance Services Overview

Samir El Ouahabi Julien Laurent

May 2017

Conterparty due diligence

Bankers World Online

The KYC Registry

Name Screening Name Screening

Compliance Analytics Payments Data Quality

SWIFT Compliance Services

Get support throughout the compliance and financial crime control process

SWIFT Compliance Services KYC Registry Overview

Close partnership with leading Financial Institutions

Drives Adoption

Promotes Standards

Designs Roadmap

Validates Features

Standardised baseline

Up-to-date information

Data verification by SWIFT

Cooperative business model

Secure, user-control access

Launched in December 2014 in collaboration with Bank of America Merrill Lynch, Barclays, Citi, Commerzbank, Deutsche Bank, Erste Group Bank AG, HSBC, ING, J.P.Morgan, Raiffeisen Bank International AG, Societe Generale, and Standard Chartered Bank.

3,700+ financial institutions 1,970+ in Europe, Middle East and Africa 1,040+ in Asia Pacific 670+ in the Americas 200+ countries and territories worldwide

A standard set of KYC data Clear and transparent standard of ~130 KYC data elements and 34 documents agreed & endorsed by the industry working group

Category I - Identification of the customer* ̶ License, Proof of Regulation, Extract from Registers, Certificate of Incorporation ̶ Legal name, address, registration details and regulatory information

Category II – Ownership and management structure* ̶ Shareholding companies + Ultimate Benef. Owners >10%: identifying data ̶ Ownership structure and declaration of Ultimate Beneficial Owners ̶ Board of Directors, Executive Management: identifying data + listings ̶ Annual Report

Category III – Type of business and client base* ̶ High risk products and services ̶ Operating geographies and customer verticals

Category IV – Compliance information* ̶ Enhanced AML Questions, AML-related contacts ̶ AML docs: AML policies and procedures, Wolfsberg Questionnaire, USA Patriot Act,

response to negative news

Category V – Tax information* ̶ TIN, FATCA information ̶ FATCA document

*Not exhaustive list

User controlled access requires approval before the data is consulted

KYC Registry: Institution requesting

Access

Institution granting Access

KYC Data & Documents

Data contribution: Doing it right takes commitment and support

KYC Registry

1. Submitter 3. Approver

2. Controller 4. Controller

Contribution (Bank Side)

Data Validation (SWIFT Side)

All our controllers are either ex-compliance officer or trained in compliance

Total invoice = €360 Invoice limit for 81% of our members

enjoy a cap of €3,000

KYC registry

Pricing: Single entity scenario

Counterparty C Cost €120

Counterparty A Cost €120

Counterparty B Cost €120

Data Consumed

Optional content: KYC Adverse Media

Competitive license fee

Unlimited number of users

Unlimited number of articles

License covers all entities in KYC

Group Flat yearly fee 2 kEUR for small & medium banks and 10 kEUR for large banks

All KYC Registry users of a bank subscribing to KYC Adverse Media receive access

There is no limit on the volume of articles consumed per year

All entities under the same KYC Registry contract have access to KYC Adverse Media

*) Global Tier 1 & 2 vs. Global Tier 3 and above

Conterparty due diligence


The KYC Registry





Customer screening


SWIFT Compliance Services Name Screening Service

Name Screening Service

Name Screening gives you a hosted, flexible filter suite, expert list management and ongoing quality assurance, all with the simplicity of using a search engine.

The service will cover: - Online individual name checks (one-time check) Live Jan 2017 - Ongoing screening of entire customer database (recurring batch process based on

files manually uploaded) Q3 2017

Lists for Name Screening

OFAC, EU, FATF, UN…

Mandatory REPORT

Domestic, International

Mandatory EDD

Sanction Lists PEP Lists

Services offered by SWIFT: • Lists are part of the service offered • Apply a list selection for your screening process • List Updated centrally on daily basis • False positive reduction (DOB, Country, Gender, Type comparison)

Your own list

Optional AML policy

Private Lists

Dedicated categories

Optional Risk-based Approach

Negative news

Conterpartie due diligence Customer

screening Risk profile

identification Start Business

RMA / RMA Plus


The KYC Registry

Name Screening

The KYC Registry

Name Screening

The KYC Registry




RMA Analysis

RMA analysis

Content Within SWIFT BI, we can support your institution in: - creating a list of correspondents with which authenticated messages are exchanged - identifying dormant and inactive RMA authorisations and mark them as attention points - comparing your performance regarding dormant and inactive RMAs with your peers - helping you to remove the RMA key(s); deleting, after your approval, the highlighted RMA authorisations by creating the necessary RMA messages to inform the counterparties of the status of the change

Background Regulatory compliance is an undeniable challenge for financial institutions, and correspondent banking has been heavily affected by a multitude of new requirements. Managing and controlling your business relationships is of primary importance. SWIFT BI offers tools and services to overcome these challenges in an efficient way.

Compliance Analytics – Spot anomalies in your correspondent behaviour and track activity with high-risk countries

Customized reporting – RMA analysis: deep dive into your banking relationships over SWIFT and possibly close out dormant or unused ones

RMA analysis Understand the correspondent risk you are exposed to and action upon it



identification

Transaction & customer screening

Start Business

RMA / RMA Plus


The KYC Registry

Name Screening

The KYC Registry

Name Screening

The KYC Registry

Name Screening Sanctions Screening Sanctions Testing List Management




SWIFT Compliance Services Sanctions Screening Overview

Sanctions Screening: SWIFT’s hosted screening service

Challenges of small institutions

Regulatory scrutiny and enforcement of sanctions policies is increasing

Increasing pressure from correspondents to be compliant

Available screening solutions complex and costly to maintain

Increasing challenges for low-volume financial institutions

SWIFT provides

• Screening engine & user interface • Sanctions List update service with

enhancements • No additional footprint • Centrally hosted and operated by

SWIFT • Real time • Simple to configure and use

A fully managed service to screen all transactions

SWIFT Sanction Screening

Transactions Inbound or outbound Transaction is delivered

Transaction abort notification (outbound) Transaction is delivered flagged true hit (inbound)

Case management

User(s) Interface authenticated via Secure Tokens

Bank A Bank B

SWIFT Network

SWIFT Sanction Screening Service

(no hit or false positive)

Timeframe Time to compliance Few weeks

Footprint Installation and Integration

Zero

Scope Transaction screened

Fin Cat 1,2,4,7,9

System performance Volume limitation

Real time unlimited

Level 2 Level 1

SWIFT Sanction Screening SWIFT only version No hit demo

Transactions Inbound or outbound

Transaction is delivered

Case management


Bank A Bank B

SWIFT Network





Zero


Fin Cat 1,2,4,7,9


Real time unlimited

Level 2 Level 1

Transactions Inbound or outbound

Case management


Bank A Bank B

SWIFT Network




Zero


Fin Cat 1,2,4,7,9


Real time unlimited

Level 2 Level 1

SWIFT Sanction Screening SWIFT only version No hit demo

The Level 1 user selects one of the pending alerts to view the details

Workflow user interface: Level 1 user

Message content

Hits generated by the message & sanctions list identifier

Sanctions list record detail

Escalate to Level 2 Release the message

Workflow user interface : Level 1 user

Abort or Flag the message

Release the message

Workflow user interface : Level 2 user

When the user Level 2 confirms a true hit on an outgoing message: • L1 user comments will be displayed for the L2 user to review and included the audit

report • The original message is aborted, an abort notification (MT019) is sent to the user • On incoming messages the message will flagged and queued for process

Sanction Screening Connector overview all type of payments

Transactions Inbound / outbound

Transaction to be screened

Transaction flagged and queued for process

Case management

Bank A Bank B

Payment Network(s)




Timeframe Time to compliance

Few months


Limited


All messages


10,000 Msgs per day or 3600 per hours

Messaging

Transaction released

Connector

Level 2 Level 1

Sanctions Screening: Filtering engine

• Using Fircosoft: ̶ Used by 8 of the top 10 banks globally ̶ Long term relationship ̶ Includes Fuzzy logic and String matching ̶ SWIFT has selected the default service and is continuously adapting the filter

to clients, market and regulators requirements

• Hosted by SWIFT: ̶ SWIFT maintains the filtering engine for all clients ̶ No hardware investment from the client * ̶ No software investment from the client *

• Providing the best in class solution for a fraction of the investment.

* If there is a needs to screen any format, a connector is required and implies a small licence fee



identification


Start Business

RMA / RMA Plus


The KYC Registry

Name Screening

The KYC Registry

Name Screening

The KYC Registry





SWIFT Compliance Services Sanctions Testing Overview

Efficiency Reduce false positives through iterative testing Build optimisation tests into your processes Understand parameter changes Manage and tune rules and “good-guy” lists

with

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

Testing Meeting regulatory demands

Tuning Managing cost and resources

Sanctions compliance – balancing priorities

Sanctions Testing: Overview

33

Automate • Repeat • Compare • Monitor

Define test objective

Download test files

Process test files

Upload hit results

View test results

Formats

Settings

Lists

Exact match testing - evaluates the filters capabilities to match sanctioned names as they appear on the tested sanctions lists. Risk information match testing - evaluates the filters capabilities to match additional risk information such as BICs and country names. Fuzzy match testing - evaluates the filters capability to match variants of sanctioned names.

Sanctions Testing: Fuzzy Matching by Derivation

Chart shows filter effectiveness across different fuzzy derivations

Assessment

Standard Services •Standard report and assessment approach

•Workshop & findings •Assessed performance of your own filters

Captures Performance •Provides assurance that you filter is working

•Captures Risk appetite •Understand fuzzy performance •Identifies quick win efficiency improvements

Customization •Scope of report can be customized and extended

•Verification for filter upgrades •Vendor selection or internal filter comparison



identification


Behavioral monitoring

Start Business

RMA / RMA Plus


The KYC Registry

Name Screening

The KYC Registry

Name Screening





SWIFT Compliance Services Compliance Analytics Overview

Compliance Analytics: Overview

Compare relative distribution of transactions by value range

Track value range evolution over time

Spot anomalies in correspondent behaviour Monitor hidden payment flows & nested activity Identify countries of origin and destination, and which institutions are involved

Track RMA status evolution over time

• Geographic distribution of RMAs

Monitor correspondent relationships

• RMA relationships in high-risk countries

Customer due diligence

Customer screening

Risk profile identification


Ongoing due diligence

Behavioral monitoring

Start Business

RMA / RMA Plus


The KYC Registry

Name Screening

The KYC Registry

Name Screening

The KYC Registry





Leveraging more than 40 years of innovation and expertise, SWIFT’s comprehensive suite of financial crime compliance products enables you to set the standard in operational insight, transparency and regulatory compliance.

Thank you!

SWIFT Compliance Services

Documents

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