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1、2 July 2010,Victor Matafonov, Group Head of Systems and Monitoring, Financial Crime Risk Martin Rowlands Group Sanctions Adviser,Introduction sanctions compliance roles,Victor Matafonov Group Head of Systems and Monitoring, Financial Crime Risk Sets standards for operation of Groups screening system
2、s Oversees deployment of screening lists Ensure systems users have proper guidance Assurance Martin Rowlands - Group Sanctions Advisor Maintains Group Policy and Procedures Training General advice and internal reporting Transactional advice Regulatory relationships,2,Agenda,Introduction Nature and i
3、mpact of sanctions Sanctions compliance in banks Compliance challenges System selection process,3,Introduction to Standard Chartered Bank (SCB),4,Established for over 150 years Dual-primary listed - London, HK Top 15 of FTSE 100 companies Regulated by FSA 73,800 employees, 125 nationalities 75 count
4、ries and territories Income $15.2 b, PBT $5.1b, Assets $435b American Express Bank acquired Feb 08,Key facts,Focus on Asia, Africa and the Middle East,*Based on Final Results 2009,Our Business,Consumer Bank,Wholesale Bank,5,International Profile,6,Focus on Asia, Africa and Middle East,International
5、sanctions,Nature and impact of international sanctions,7,International sanctions,Sanctions are measures imposed by governments to deprive a country, organisation or individual of: Financial and/or economic assets The benefit of trade Economic interaction with the country or countries imposing or imp
6、lementing sanctions,8,International sanctions,US sanctions against named parties, and against six countries (Myanmar / Burma, Cuba, Iran, North Korea, Sudan, Syria) UK sanctions against named parties,9,International sanctions,United Nations sanctions European Union sanctions Other country sanctions
7、against named countries or parties, e.g. country boycotts of Israel; country sanctions against named parties,10,Impact of sanctions,Criminal offences corporate entities individuals Regulatory and/or criminal fines Regulatory reviews, audits and enforcement actions Licence issues Reputational impact,
8、11,Impact of sanctions,Sanctions remain a priority for major regulators: UK: FSA April 2009 - thematic review on UK sanctions: “We expect firms to implement more effective systems and controls.” US: Credit Suisse December 2009 - $536m fine over Iran sanctions; ABN Amro May 2010 additional $500m fine
9、. Sanctions compliance remains a top priority in SCBs Compliance and Assurance agenda for 2010, which projects further enhancements to the Groups sanctions compliance programme.,12,Our approach to sanctions compliance,Continuous improvement approach Actively seeking opportunities to enhance processe
10、s Ongoing benchmarking Commitment to remain at industry best practice Integral part of the Groups sustainability programme,13,Sanctions compliance,Sanctions compliance in banks,14,Sanctions compliance programme,A comprehensive sanctions compliance programme includes the following elements: I Policie
11、s and procedures II Training and awareness III Automated screening systems IV Management information and Assurance V Governance and oversight,15,Compliance programme objectives,I Policies and Procedures Maintain in line with changing regulation and industry best practice Continuously improve clarity
12、 and ease of use II Training and Awareness Raise awareness of sanctions compliance risks Improve the technical understanding of targeted staff,16,Compliance programme objectives,III Automated Screening Systems Ongoing improvement: effectiveness and operational efficiency Align screening capabilities
13、 with changing best practice Maximise standardisation across the Group IV Assurance Maintain/ improve framework of controls, management information and assurance V Governance and Oversight Develop and drive sanctions compliance strategy Ensure effective management oversight maintained,17,Sanctions c
14、ompliance programme,I Policies and Procedures,18,19,Policies and Procedures,Policies and Procedures,Policy and Procedures apply globally (subject to dispensations) Clear rules which describe transaction types permitted and prohibited Clear responsibilities for advising Operational procedures focusse
15、d on key risk areas those which make payments or release assets,20,Policies and Procedures,Group Sanctions Policy Country Sanctions Procedures and US Persons Procedure Procedures concerning dealings with named sanctioned parties US sanctioned parties UK sanctioned parties,21,Policies and procedures
16、- challenges,Clarity and simplicity in procedures Prohibition of attempts to circumvent sanctions Escalation process Internal reporting of any departures from procedures and preventive steps,22,Sanctions compliance programme,II Training and Awareness,23,Training and awareness,Sanctions elements in t
17、raining for basic banking processes (e.g. account opening) Sanctions components in Financial Crime Risk related training (e.g. Anti Money Laundering eLearning) Periodic sanctions-specific training for target groups: Trade teams Cash Management teams Country Heads of Financial Crime Risk Relationship
18、 Management teams,24,Sanctions compliance programme,III Automated screening systems (refer end of presentation),25,Sanctions compliance programme,IV Management Information & Assurance,26,Management Information & Assurance,Metrics and Management Information Monthly account and transaction screening m
19、etrics. Country Financial Crime Risk staff track issues to resolution. Consolidated numbers reported to Group Financial Crime Risk Committee. Risk Assessment and Assurance Key Control Self Assessment to ensure compliance with policies and procedures in training and customer / transaction screening.
20、Ongoing risk assessment of products and services. External benchmarking.,27,Sanctions compliance programme,V Governance and oversight,28,Governance and Oversight,Country Financial Crime Risk teams Country management Regional Compliance Head Country operations teams Country management Group Operation
21、s Group Financial Crime Risk Group Head, Compliance and Assurance Group Board,29,Sanctions compliance programme,III Automated screening systems,30,Automated Screening Systems,Agenda Watchlists Overview of screening processes, workflows and guidance: Customer screening Transaction screening Continuou
22、s improvement processes Challenges Risk assessment Initiatives underway Assurance Systems selection process,31,Group Watch lists - Sources,The Groups watch lists are made up of the following components: External vendor provided data consolidated regulatory lists and specialist value added lists Exte
23、rnal data not publicly available (e.g. from some regulators such as Singapore) Internal Group watch lists (i.e. prohibited names, country names, SWIFT Bank Identification Codes). Internal country specific watch lists (e.g. lists of credit defaulters, fraudsters, exited accounts etc). By far the bigg
24、est component is from the external vendor (i.e. more than 1 million names). They provide us with names in 3 broad categories: A consolidation of publicly available regulatory lists including UK Her Majestys Treasury (HMT) list, US Office of Office of Foreign Asset Control (OFAC), UN, EU. A listing o
25、f Politically Exposed Persons (PEPs) A listing of names associated with adverse media,32,33,33,Group Watch lists - Uses,Global screening of potential and existing customer names and select other parties (e.g. counterparties in Trade, directors of corporate entities etc) against: All Group watchlists
26、 Global screening of transactions (e.g. SWIFT messages) against: Global regulatory lists (i.e. HMT, OFAC, Enhanced OFAC, US Patriot Act). Global internal lists (i.e. prohibited names, country names, BIC codes) Country specific sanctions lists (e.g. MAS, HKMA, UN),34,34,34,Overview of Screening Proce
27、sses,Automated screening of customers and other parties (e.g. counterparties, directors or beneficial owners of corporate entities, staff, vendors etc) against the all Group watch lists: Prior to account opening or undertaking selected transactions (e.g. trade) Periodically to ensure existing custom
28、ers / other parties have not been added to watch lists. Looking for name or word matches Pre and after the event Outcomes of confirmed matches: Reject new account or transaction application. Take appropriate action on existing account in accordance with Group Customer Due Diligence (CDD) / Sanctions
29、 policies and procedures. Amend risk rating. Issue Suspicious Activity Report (SAR),Automated screening of transactions (e.g. SWIFT messages) against the following watchlists: Global regulatory lists (i.e. HMT, OFAC, Enhanced OFAC, US Patriot Act). Global internal lists (i.e. prohibited names, count
30、ry names, BIC codes) Country specific mandatory lists (e.g. MAS, HKMA, UN) Looking for name or word matches. Real time prior to message being sent or acted upon. Outcomes of confirmed matches: Reject transaction. Take appropriate action on transaction in accordance with Group Sanctions policies and
31、procedures. Amend customer risk rating. Issue SAR.,Screening of customer / other party names,Screening of transactions,35,35,35,Screening Statistics - Group,Customer Due Diligence (CDD) screening at account opening: Approx.16k registered users across the Group undertake approx. 400 k searches every
32、month as part of Customer Due Diligence processes and other investigative searches. This results in approx. 52 k alerts (potential matches) per month being investigated across the Group. Periodic customer screening: Periodic rescreen of the entire customer base (approx. 15 m retail and 126 k wholesa
33、le customers) against all Group watch lists. This results in approx. 160 k alerts per month being investigated by approx. 75 staff within the Chennai SSC and in the respective countries. Transaction screening: Up to 7 m payment messages are screened per month for sanctions purposes, generating up to
34、 460 k alerts per month for further investigation. The equivalent of approximately 70 full time operations staff are involved in sanctions screening processes.,WLM Watch List Manager WLM feeds two functions:- AOC Account Opening Check for new customers. CMR Customer Match Report for periodic screeni
35、ng of existing accounts,WLM,AOC,CMR,16,000 users across the Group access AOC to identify high risk sanctioned and high risk names prior to account opening,External Vendor Lists Regulatory Lists PEPs & Associates Adverse Media Enhanced lists,Internal Lists Group lists Country Lists,Periodic Reports (
36、Monthly) are run per country to identify name matches between the Watch Lists and Customer Database,Lists of customer names (country / business / Group),WLM Database,Screening Systems Used Customer Screening,36,Source Customer & Counterparty Names Data,Watchlist Management,Analysis & Reporting,Escal
37、ation to Country Compliance and / or Group Sanctions Advisor,Review of Name Matches,Sanctions Screening System,Shared Service Centre,Payment Operations in Country,Messaging System,Review of Name Matches,Payment Operations in Shared Service Centre, Chennai, India,Screening Systems Used Transaction Sc
38、reening and Workflow,Alerts (potential name match),Notification of release / reject,Escalation of alert.,37,Sanctions Guidance GFCR Policies, Procedures and Guidance,38,Sanctions Guidance Key investigation steps,39,Review alert score, the closer the score to 100% the closer the match. Compare alerte
39、d customer / transaction details against watch list entry. For individual customers, compare unique identifying information such as date of birth, passport numbers, fathers name, country of birth, nationality, residence and other background information. For entity customers, compare unique identifyi
40、ng information such as incorporation details (i.e. country of incorporation, country of operation) company profile and other background information. For payment messages compare address details to determine if it is the same person or entity. Review other background information on watch list entry t
41、o see if there is any commonality. If still uncertain can go back to correspondent bank and ask for details.,Sanctions Guidance Escalation process,40,Outlined in Automated Payment Screening Procedure, Group Names Screening Systems Procedure and Group Sanctions Procedure. Group Names Screening System
42、s Procedure Steps to be taken if a confirmed match against sanctions list: follow the Group Sanctions Procedure, inform Group Sanctions Adviser immediately of the name match and action taken, procedures require to act as bound by UK law unless there is a conflict with local law, in which case refer
43、to Group Sanctions Procedure.,41,41,41,41,Continuous improvement,Sanctions Enhancement Programme,Internal Internal Audit,Benchmarking through Engagement with industry bodies,FSA Thematic industry review,External consultancy,Internal Periodic policy and procedure reviews by Group Sanctions Advisor &
44、Group Head of Systems & Monitoring,Industry Guidance Basle Committee Wolfsberg Group FATF SR7 JMLSG,Name Matching Logic,There are essentially two types of name matching logic: Exact name matching used to perform exact name matching against main watch list entities and aliases. Non exact name matchin
45、g (fuzzy matching) used to detect non exact name matches against watch list entities and aliases. This includes part matches, name variations, spelling variations and permutations. Specific rules help identify close matches by eliminating spaces, special characters, noise words or by adding synonyms
46、, noise words etc. Non-exact name matching increases the level of false alerts, therefore systems need to employ techniques to reduce them such as “exclusion or good guy” lists, noise word suppression etc.,42,Screening System Testing and Tuning,With the help of external consultants, SCB created an i
47、ndependent testing team to periodically test the effectiveness its customer and payment screening systems. The team creates data files from sanctions lists to test approximately 40 different exact and non-exact name match scenarios. These are then run against the banks sanctions screening systems in
48、 a test environment and the output reviewed to identify areas where the systems logic can be enhanced. The general trend is that exact name matching in banks has historically been working effectively, however the level of effectiveness of non-exact name matching is much more varied and there are tes
49、ts that require improvement. Work is continuing to improve these results.,43,44,44,44,44,44,SWIFT Messages Types Screened,There are currently 243 SWIFT Message Types (MTs) in use across the industry. Banks may not subscribe to or use all of these and many are not direct payment instructions. Banks have each decided for themselves what MTs to screen. SCB risk assesses the SWIFT MTs used by the business and covered by its screening systems and with the assistance of external consultants compares that lis