1. Sanctions screening as a service Sibos 2010, Amsterdam Andy Schmidt, TowerGroup Nicolas Stuckens, SWIFT

2. Agenda Andy Schmidt, Research Director – Global Payments, TowerGroup Nicolas Stuckens, Manager AML & Sanctions initiatives, SWIFT

3. Pressure from Multiple Fronts on Financial Institutions Regarding Anti-Money Laundering (2010) Source: TowerGroup Regulatory Pressure Mandatory compliance Global focus on AML and counter- terrorist financing Strict(er) rules and enforcement Pressure to retain headcount and focus on AML, fraud, and compliance Fraudsters Electronic payment types are proliferating Identity theft is on the rise US dollar is again the preferred currency of drug traffickers Banks are expected to be distracted for some time Internal Pressure AML is not a differentiator Banks are strapped for capital and liquidity Banks are under pressure to increase revenue and streamline the business Midtier and de novo banks lack AML sophistication Regulatory FINANCIAL INSTITUTION Internal Fraudsters

4. Global Areas of Noncompliance with the Financial Action Task Force on Money Laundering (2005–09) Source: Financial Action Task Force for Money Laundering, TowerGroup Note:DNFBP = designated non-financial businesses and professions. *FATF Special Recommendations on Terrorist Financing.

5. Anti-Money Laundering Processes that can be Automated (2010) Note:AML = anti-money laundering, FIU = financial intelligence unit, PEP = politically exposed person, SAR = suspicious activity report. Customer Due Diligence: “Know Your Customer” (KYC) Customer verification – Collecting customer information – Identifying wrongdoers and PEPs Customer risk scoring Customer life-cycle maintenance AML Management Provision of regulatory updates AML awareness training Case Management and Regulatory Reporting Systems Tracking, investigating, and following up on alerts Filing SARs with FIUs Maintaining customer information for 5 years after account closing Transaction Monitoring Screening for suspicious behavior Screening transaction counterparties and beneficiaries Source: TowerGroup

6. Large Banks vs. Small Banks: Same Planet – Different Worlds Small banks often lack the tools and resources needed to combat money laundering despite similar levels of regulatory pressure

7. Agenda Andy Schmidt, Research Director – Global Payments, TowerGroup Nicolas Stuckens, Manager AML & Sanctions initiatives, SWIFT

8. Your institution A combination of best of breed: –Filter application –Sanctions List update service –Operational excellence Centrally hosted and operated by SWIFT Real-time filtering service of FIN messages No local software installation & integration project A combination of best of breed: –Filter application –Sanctions List update service –Operational excellence Centrally hosted and operated by SWIFT Real-time filtering service of FIN messages No local software installation & integration project Sanctions screening service overview Your correspondents

9. Roles & responsibilities User Select MTs to filter Select public sanctions lists to apply Review alerts & decision Define internal roles, responsibilities & escalation path Sign off on service description SWIFT Manage filter Manage lists (acquisition, test & upload) Notify users in case of alerts Provide audit trail Security, reliability, business continuity Independent Audit review

10. notification Your institution How does it work? Messages resulting in alerts are temporarily held in the filter and notified to the bank for investigation Your correspondents

11. Alerts abort notif. Your institution In case of true hit on an alert When the user confirms a true hit on an outgoing message: The original message is aborted An abort notification (MT019) is sent to the user When the user confirms a true hit on an outgoing message: The original message is aborted An abort notification (MT019) is sent to the user Your correspondents

12. special queue Alerts Your institution In case of true hit on an alert When the user confirms a true hit on an incoming message: The original message is flagged… …then delivered to the recipient that routes it to a special queue for appropriate processing When the user confirms a true hit on an incoming message: The original message is flagged… …then delivered to the recipient that routes it to a special queue for appropriate processing Your correspondents

13. Benefits Cost efficiency Ready to use Easy to use Real time State of the art Security Confidentiality Protected access Message integrity Resilience Service Level Agreement Business continuity Disaster recovery programme Operational excellence 24x7 support Local language support Quality checks A service provided by

14. Thank you