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1、2 July 2010,Victor Matafonov,Group Head of Systems and Monitoring,Financial Crime RiskMartin RowlandsGroup Sanctions Adviser,Introduction sanctions compliance roles,Victor Matafonov Group Head of Systems and Monitoring,Financial Crime RiskSets standards for operation of Groups screening systemsOvers
2、ees deployment of screening listsEnsure systems users have proper guidance AssuranceMartin Rowlands-Group Sanctions Advisor Maintains Group Policy and ProceduresTrainingGeneral advice and internal reportingTransactional adviceRegulatory relationships,2,Agenda,IntroductionNature and impact of sanctio
3、ns Sanctions compliance in banksCompliance challengesSystem selection process,3,Introduction to Standard Chartered Bank(SCB),4,Established for over 150 yearsDual-primary listed-London,HKTop 15 of FTSE 100 companiesRegulated by FSA73,800 employees,125 nationalities75 countries and territoriesIncome$1
4、5.2 b,PBT$5.1b,Assets$435bAmerican 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 sanctions,Nature and impact of intern
5、ational sanctions,7,International sanctions,Sanctions are measures imposed by governments to deprive a country,organisation or individual of:Financial and/or economic assetsThe benefit of tradeEconomic interaction with the country or countries imposing or implementing sanctions,8,International sanct
6、ions,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 against named countries or parties,e.g.country boyc
7、otts of Israel;country sanctions against named parties,10,Impact of sanctions,Criminal offencescorporate entitiesindividualsRegulatory and/or criminal finesRegulatory reviews,audits and enforcement actionsLicence issues Reputational impact,11,Impact of sanctions,Sanctions remain a priority for major
8、 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.Sanctions compliance remains a top priority in SCBs Compliance and Ass
9、urance agenda for 2010,which projects further enhancements to the Groups sanctions compliance programme.,12,Our approach to sanctions compliance,Continuous improvement approachActively seeking opportunities to enhance processesOngoing benchmarkingCommitment to remain at industry best practice Integr
10、al 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 Policies and proceduresII Training and awarenessIII Automated screening systemsIV Ma
11、nagement information and Assurance V Governance and oversight,15,Compliance programme objectives,I Policies and Procedures Maintain in line with changing regulation and industry best practiceContinuously improve clarity and ease of useII Training and Awareness Raise awareness of sanctions compliance
12、 risks Improve the technical understanding of targeted staff,16,Compliance programme objectives,III Automated Screening Systems Ongoing improvement:effectiveness and operational efficiencyAlign screening capabilities with changing best practiceMaximise standardisation across the GroupIV AssuranceMai
13、ntain/improve framework of controls,management information and assuranceV Governance and OversightDevelop and drive sanctions compliance strategyEnsure effective management oversight maintained,17,Sanctions compliance programme,I Policies and Procedures,18,19,Policies and Procedures,Policies and Pro
14、cedures,Policy and Procedures apply globally(subject to dispensations)Clear rules which describe transaction types permitted and prohibited Clear responsibilities for advisingOperational procedures focussed on key risk areas those which make payments or release assets,20,Policies and Procedures,Grou
15、p Sanctions PolicyCountry Sanctions Procedures and US Persons ProcedureProcedures concerning dealings with named sanctioned partiesUS sanctioned partiesUK sanctioned parties,21,Policies and procedures-challenges,Clarity and simplicity in proceduresProhibition of attempts to circumvent sanctions Esca
16、lation processInternal reporting of any departures from procedures and preventive steps,22,Sanctions compliance programme,II Training and Awareness,23,Training and awareness,Sanctions elements in training for basic banking processes(e.g.account opening)Sanctions components in Financial Crime Risk re
17、lated training(e.g.Anti Money Laundering eLearning)Periodic sanctions-specific training for target groups:Trade teams Cash Management teams Country Heads of Financial Crime RiskRelationship Management teams,24,Sanctions compliance programme,III Automated screening systems(refer end of presentation),
18、25,Sanctions compliance programme,IV Management Information&Assurance,26,Management Information&Assurance,Metrics and Management Information Monthly account and transaction screening metrics.Country Financial Crime Risk staff track issues to resolution.Consolidated numbers reported to Group Financia
19、l Crime Risk Committee.Risk Assessment and Assurance Key Control Self Assessment to ensure compliance with policies and procedures in training and customer/transaction screening.Ongoing risk assessment of products and services.External benchmarking.,27,Sanctions compliance programme,V Governance and
20、 oversight,28,Governance and Oversight,Country Financial Crime Risk teamsCountry management Regional Compliance HeadCountry operations teamsCountry management Group Operations Group Financial Crime RiskGroup Head,Compliance and Assurance Group Board,29,Sanctions compliance programme,III Automated sc
21、reening systems,30,Automated Screening Systems,AgendaWatchlistsOverview of screening processes,workflows and guidance:Customer screeningTransaction screeningContinuous improvement processesChallengesRisk assessmentInitiatives underwayAssuranceSystems selection process,31,Group Watch lists-Sources,Th
22、e Groups watch lists are made up of the following components:External vendor provided data consolidated regulatory lists and specialist value added listsExternal data not publicly available(e.g.from some regulators such as Singapore)Internal Group watch lists(i.e.prohibited names,country names,SWIFT
23、 Bank Identification Codes).Internal country specific watch lists(e.g.lists of credit defaulters,fraudsters,exited accounts etc).By far the biggest 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 availa
24、ble regulatory lists including UK Her Majestys Treasury(HMT)list,US Office of Office of Foreign Asset Control(OFAC),UN,EU.A listing of 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
25、 names and select other parties(e.g.counterparties in Trade,directors of corporate entities etc)against:All Group watchlistsGlobal 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,countr
26、y names,BIC codes)Country specific sanctions lists(e.g.MAS,HKMA,UN),34,34,34,Overview of Screening Processes,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
27、 opening or undertaking selected transactions(e.g.trade)Periodically to ensure existing customers/other parties have not been added to watch lists.Looking for name or word matchesPre and after the eventOutcomes of confirmed matches:Reject new account or transaction application.Take appropriate actio
28、n on existing account in accordance with Group Customer Due Diligence(CDD)/Sanctions 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 O
29、FAC,US Patriot Act).Global internal lists(i.e.prohibited names,country 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 tra
30、nsaction in accordance with Group Sanctions policies and 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 t
31、he Group undertake approx.400 k searches every 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 ba
32、se(approx.15 m retail and 126 k wholesale 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 san
33、ctions purposes,generating up to 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 ManagerWLM feeds two functions:-AOC Account Opening Check for new customers.CMR Customer Match
34、 Report for periodic screening 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 Countr
35、y Lists,Periodic Reports(Monthly)are run per country to identify name matches between the Watch Lists and Customer Database,Lists of customer names(country/business/Group),WLMDatabase,Screening Systems Used Customer Screening,36,Source Customer&CounterpartyNamesData,Watchlist Management,Analysis&Rep
36、orting,Escalation to Country Compliance and/or Group Sanctions Advisor,Review of Name Matches,Sanctions ScreeningSystem,Shared Service Centre,Payment Operations in Country,Messaging System,Review of Name Matches,Payment Operations in Shared Service Centre,Chennai,India,Screening Systems Used Transac
37、tion Screening 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
38、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 identifying informat
39、ion 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 to see if there is
40、 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 Systems Procedure Steps to
41、 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 to Group Sanctions Proce
42、dure.,41,41,41,41,Continuous improvement,SanctionsEnhancementProgramme,InternalInternal Audit,Benchmarking throughEngagement with industry bodies,FSAThematic industry review,External consultancy,InternalPeriodic policy andprocedure reviews byGroup Sanctions Advisor&Group Head of Systems&Monitoring,I
43、ndustry GuidanceBasle CommitteeWolfsberg GroupFATF SR7JMLSG,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 matching(fuzzy matching)used to detect non exact
44、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,noise words etc.Non-exact name matching increases
45、 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 independent testing team to periodically test the effectiv
46、eness 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 a test environment and the output reviewed to identify are
47、as 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 tests that require improvement.Work is continuing to improve the
48、se results.,43,44,44,44,44,44,SWIFT MessagesTypes 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 assesse
49、s the SWIFT MTs used by the business and covered by its screening systems and with the assistance of external consultants compares that list to industry peers.As a result a group minimum(containing approx 90 MTs)has been established and systems are tuned to include these as a minimum.Systems are upd
50、ated and aligned as and when policy amended.,45,45,45,45,45,Evaluation of messages rejected,All banks will from time to time have their messages rejected by other banks.It is important to monitor this and take appropriate action to avoid continuing rejects.The trends that we are seeing are as follow
