Compliance Services

Jakarta Business Forum 28/04/2015

Alex Medana

Agenda

• SWIFT: your compliance solutions provider

• Key industry compliance challenges and SWIFT’s compliance portfolio

• SWIFT Sanctions Screening Solution for transaction screening

• SWIFT KYC Registry solution to improve KYC correspondent banking processes

• Proposed next steps

Who Are We?

A global cooperative owned by its member banks providing core secure financial messaging services to the global financial community

22.3 million Transactions messages exchanged on average

between financial institutions

globally every day

10,800+ SWIFT users

200+ Countries and

territories

• Not for profit cooperative, owned by you

• Your bank uses SWIFT today for payments

& trade transactions

• SWIFT’s compliance solutions were

developed following a consultation with

the community on how we could help

• SWIFT is investing significantly in growing

its compliance portfolio

• The direction of the compliance roadmap is

lead by the community

SWIFT: Your Compliance Solution Provider

SWIFT and you:

7,000 correspondent banking customers, 600+ compliance customers

Key Industry Compliance Challenges Today

Ever increasing and

changing regulations

Significant costs in

complying with regulations

Penalties for non

compliance

All geographies / All types of

players impacted

Lots of duplication for

universal challenges

Lots of different, costly,

complex solutions

No competitive

advantage for banks

Community issues calling for community solutions …

SWIFT

Sanctions Screening

Why are Sanctions so complex?

40,000 names on lists

4 Billion fuzzy combinations

15.5 Billion $ fines levied on financial institutions for violation of sanctions regulations

1 Day

Average interval between sanctions list updates for banks active globally

-50%

Decrease in number of correspondent relationships from some US banks

+100%

Increase in alerts every 4 years due to increase in SDNs and transaction numbers

+20%

Yearly increase in names and aliases on US OFAC list

• Fines are getting bigger, but more interestingly:

– Cost of remediation exceeds amount of fine

– Includes limitation to business (e.g. no USD clearing)

– Regulators pay more attention to the quality of the screening

• Banks are terminating correspondent relationships due to:

– Risk factor (weak financial crime controls )

– Low return on relationship due to Cost of compliance

• Impacts large and small financial institutions

– Especially smaller FIs due to the ever growing requirements

– Large FIs face increased regulatory scrutiny

Sanctions impact

• Increasing pressure from

Regulators and Correspondents to

be sanctions compliant

• Available screening solutions

complex and costly to maintain

• Increasing challenges for low-

volume financial institutions

A centralised

screening

service hosted

by SWIFT

SWIFT Sanctions Screening- SWIFT’s centralised screening service

A SWIFT solution to screen all Payments and Trade Finance real time

Customer identification & verification

Initial due diligence

Customer screening

Ongoing due diligence

Customer & transaction monitoring

Transaction screening

start transacting

On-boarding process Ongoing reviews

Sanctions Screening over SWIFT is a Transaction screening service:

• FIN MT messages

• Real time

SWIFT Sanctions Screening The process challenges it addresses...

Your institution

Your correspondents

SWIFT Sanctions screening over SWIFT network

• Screening engine & user interface

• Sanctions List update service with enhancements

• Minimum/no installation or integration required

• Centrally hosted and operated by SWIFT for SWIFT users

• Real-time

SWIFT Sanctions Screening solution – Customer ramp up

April 2015

330+ institutions:

• 70 in Asia

• 20 in China

• 17 Central Banks

100+ countries

One new client every 2 working days since April 2012

Public Sanctions lists available Country Description

Australia Department of Foreign Affairs and Trade

DFAT Iran Specified Entities List

DFAT Country List

Canada Office of the Superintendent of F.I.

OSFI - United Nations Act Sanctions

Department of Foreign Affairs and Trade

DFAIT Countries Embargoes

European Union

European Official Journal

EUROPE Countries Embargoes

EU Ukraine Restrictive Measures

France Journal Officiel français

Hong Kong Hong Kong Monetary Authority

HKMA Countries Embargoes

Japan Ministry of Finance

Special Measures

Netherlands Frozen Assets List - Dutch Government

New Zealand New Zealand Police

Country Description

China Ministry of Public Security of the PRC

Singapore Monetary Authority of Singapore - Investor Alert List

Switzerland Secrétariat d'Etat à l'Economie

SECO Countries Embargoes

United Kingdom

Her Majesty's Treasury

HMT Countries Embargoes

HMT Ukraine Restrictive Measures

United Nations

United Nations

UN Countries Embargoes

United States of America

Financial Crimes Enforcement Network

OFAC Embargoed Countries

OFAC Foreign Sanctions Evaders

OFAC Part 561

OFAC Palestinian Legislative Council

OFAC Sectoral Sanctions Identifications

OFAC Non-SDN Iranian Sanctions Act

OFAC Specially Designated Nationals

Public sanctions lists

updated by SWIFT daily

35

Private lists & Good-guys lists

managed by the users

Message content

Hits generated by the

message & sanctions

list identifier

Sanctions list record

detail

SWIFT Sanctions Screening - screenshot

Interface

Alliance

Access

Connector

for Sanctions

Back Office

Sanctions

Screening

FIN Interface

Different options: FIN Copy vs Connector

Back Office

SWIFT

/other network

Current FIN Copy option

Connector option New

SWIFT

Transaction to be screened

“Good” transaction

“Rejected” transaction

Implementation options

Copy option

Transparent routing of FIN transactions

to the service using FIN-Copy

Few weeks

Zero

Limited

FIN Cat 1, 2, 4, 7

Connector option

Query/response of all transaction types

through API call to the service

Few Months

Limited

Enhanced

All transaction types

Your institution Your correspondent

1

2

3

Your institution Your correspondent

1 2

3

Limitations

Flexibility

Footprint

Timeframe

Transactions

Screened

Granularity

on what is filtered

Installation &

integration

Time to

compliance

Screening & Audit Report

Screening Report

Audit Report: • Copy of each

alerted transaction

• Hit details

• Comments and final status

• Audit log of all transactions screened

• Audit log of all operators activity

• Audit log of public, private and good-guys list selection and activity

Quality assurance Report

• Periodical quality assurance checks on effectiveness of the service

• Measures adherence of sanctions lists to regulatory sources

• Measures exact and fuzzy matching capabilities

• Provides details on filter configuration and related impact

SWIFT Sanctions Screening - Benefits to the community

• Choose the lists you need, updated in the

system for you

• Banks already using SWIFT

for their transactions

• Enables fast compliance to sanctions

regulations

• Provides credibility for medium / small

banks that you screen effectively – helps

prevent de-risking

A service provided by

330 customers, 17 central banks, in 100+ countries

• Easy to implement

• Get started in a few weeks

• Easy to use

• Secure and resilient

• Cost effective

• Real time

Going Live

• Order “live implementation”

• Define Users in Live portal

• Configure Live portal ( lists, message types )

• When fully ready, put lists on blocking mode

And you are live!

The KYC Registry

SWIFT KYC Registry Overview

• What are the typical KYC challenges in the correspondent banking space?

• How does SWIFT’s KYC Registry solution address these challenges?

• What are the benefits of SWIFT’s KYC Registry solution?

• How do you get started

KYC Correspondent Banking Challenges

• 1.3m relationships by

7,000 correspondent banks over SWIFT

• Everyone wants different things,

data quality often poor

• Much time and effort needed by

compliance and relationship

managers to collate the information

• Evolving regulatory requirements

• Different in different countries

• Correspondent banks de-risking;

reducing relationships to reduce

risk & cost of KYC processes

Industry standard and platform needed, accessible to all

Customer identification & verification

Initial due diligence

Customer screening

Ongoing due diligence

Customer & transaction monitoring

Transaction screening

start transacting

On-boarding process Ongoing reviews

Onboarding and periodic review of correspondent banking relationships

KYC Registry The process challenges it addresses…

Community request to build it

Working group set up to design it

Single Standard agreed

Data validation to ensure quality

A feature-rich easy to use platform

Unique value-added content

Free to enter your data and share it

SWIFT KYC Registry: The Industry KYC Utility

SWIFT’s KYC Registry: the solution to KYC correspondent banking challenges

SWIFT’s KYC Registry: A utility providing a single source of correspondent banking KYC information

Launched in Dec 2014: 380 entities joined to date

User-provided, user-controlled

Upload your KYC information once, control

with whom you share

Up-to-date and validated information

The standard for enhanced due diligence

Trusted third party - community solution

Promotion

SWIFT and Working Group banks promoting

Always FREE

to share !

Upload, update, manage, share

and collect your KYC data in a

single place

+ features for

User-controlled access

Portfolio & task Management

Export, report and audit

Download the video demos at

www.betterkyc.com

KYC Registry in action

The KYC Registry : the standard set of KYC data & documents

Access Category Contains

Public Entity header Basic identification info (legal name, BIC, LEI,…)

On

Request

Identification of

the Customer

Detailed information about the incorporation, existence and regulatory

status of the institution

Ownership and

Management

Structure

Detailed information on the ownership and the key controllers of the

institution such as shareholding structure, Ultimate Beneficial Owners,

directors,…

Type of Business

and Client Base

Detailed information on the business scope and activities of the institution

Compliance

Information

Detailed information on the financial crime compliance setup and

guarantees of the institution, such as the compliance contact details,

Wolfsberg questionnaire, AML policies and procedures, USA Patriot Act

Tax Information Detailed FATCA-related information and general tax data, such as the

FATCA status, the GIIN, FATCA forms and other tax identification numbers

KYC Registry Before ordering

KYC Registry Before ordering

Why get started today with the KYC Registry?

• Removes the headache immediately from the compliance and RM team on providing

data and documents continually and answering customer questions

• Free to enter your data for your own bank entities and to allow others access to see it

• Easy to get started, simple guide on what you need to do to sign up

• Support on entering your data from SWIFT on-boarding team

• YOUR CORRESPONDENT BANKS WILL BE ASKING YOU TO SIGN UP!

To get started on KYC Registry, please contact Alex Medana on:

alex.medana@swift.com

SCREENSHOTS

32

I want to contribute for

one of my entities

CONTRIBUTOR

33

I create a draft to start

filling in the information

in one of the categories

CONTRIBUTOR

34

I fill in the data fields

CONTRIBUTOR

35

I want to upload a

document

CONTRIBUTOR

36

I upload the document

CONTRIBUTOR

37

When my draft is done,

it is sent to SWIFT for

validation

CONTRIBUTOR

Thank you Alex.Medana@swift.com