25 November 2014

Italian community highlights relevance of SWIFT in compliance

Milan conference confirms standardised solutions to common challenges will help Italian banks to meet compliance challenge.

The scale of the compliance challenge, the need to manage compliance obligations without restricting business growth and the role of supporting tools to help banks achieve this balance were all subjects up for discussion at a recent compliance seminar hosted by SWIFT in Milan. The event, entitled "Combating the financial crime challenge', took place at the Tower Hall Palazzo Unicredit Milano and brought together 120 attendees from across the Italian financial community.

Setting the scene, Erika Toso, Head of South East Europe, SWIFT, highlighted how the role of compliance is evolving, and how compliance officers must fulfil a twofold function - making sure the bank is complying fully with regulation, while also uncovering in the changing environment new business opportunities. "A compliance officer cannot be an obstacle to business development, but must be a complement to it, helping to achieve the bank's strategic objectives," she told delegates.

The need for compliance to be embedded in the business was a recurring theme of the day's discussions. As Claudio Camozzo, Co-Head of Global Transaction Banking, Unicredit, and SWIFT Board Member, said: "Following the rules and being compliant with regulation is not an IT job, it is not a compliance job, it is the bank's job." Client facing staff who are not compliance experts need "training and internal structured communications and support to develop awareness and provide them with the tools they need to face customers", added Antonio Taverna, Consultant, Expert International Sector & Trade Finance, Banca Popolare di Sondrio.

For UniCredit, it is important to view the needs of the business and the needs of compliance as not different but convergent, said Alessandro Collazuol, the bank's head of AML controls. "The culture of compliance needs to be integrated into the business," he said. "Only in this way can the bank's activity be sustained. One of the aspects of the screening challenge is the need to co-ordinate preventive monitoring with the commercial requirement to execute a customer's payment orders promptly."

His colleague Fabrizio Bottani, Head of KYC, Italy, UniCredit, reinforced the need for cultural change around KYC, accepted by the whole international banking community. "The KYC process is under the spotlight. The minimum set of information required to perform KYC is not sufficient anymore and the biggest challenge is to explain this to counterparts. A profound cultural change is needed - together with a standardised approach."

International players trying to align compliance and business activities face an even bigger challenge, said Luca Luigi Turri, Head of AML, Intesa Sanpaolo. "If it is true that the business to be successful needs to become more and more international, it is also true that compliance needs to follow the same path. Today, regulators expect that a bank knows its customers in any corner of the world they are located and circulates information on customers in real time," he told delegates. As a consequence, "one of the big issues of compliance is the misalignment at international level of rules and principles."

Where international principles are not aligned there is a negative impact on competitiveness, he said - echoing another key theme of the day: how to achieve compliance alongside business growth. As Paolo Zaccardi, Senior Analyst, Aite Group, pointed out, major banks are de-risking by reducing the number of relationships they have to manage. In relation to this trend to exit businesses where the compliance risk is considered too high, Thierry Chilosi, Head of Banking Initiatives, SWIFT, said: "There is growth, but if from a risk management perspective we cut ourselves out from this growth, there is a problem. Financial integrity doesn't have to drive financial exclusion - there must be a balance. The financial industry needs to make sure that financial integrity is combined with growth, innovation and development."

Meeting the twin pressures of increasing profits while investing more in compliance requires "one unique objective through the whole bank" to increase the quality of the compliance services, Piccione told delegates - and he highlighted the SWIFT KYC Registry as a "fundamental tool" to support this. "Being part of this or not will give international counterparts looking for a correspondent in Italy very important information," he said, adding that UniCredit will be among the KYC Registry early adopters.

The scale of the compliance challenge came across very clearly from discussions. Indeed, Pasquale Bianchi, Legal, Banca d'Italia - UIF (the Bank of Italy's Financial Intelligence Unit), told delegates that the number of warnings about suspicious transactions this body received rose from 12,000 in 2008 to 70,000 in 2013. Raffaele Cosimo, Chief Executive Officer, Promontory, reminded the audience that the US authorities have fined banks a total of USD15 billion - and during the last six years the 10 major banks have paid overall fines of GBP200 billion for violations of compliance rules.

In light of this scale, speakers agreed on the need for appropriate automation across KYC, AML and sanctions screening processes - and common solutions where possible.

As Nicolas Stuckens, Head of Sanctions, SWIFT, pointed out: "The compliance space is a non-competitive area. There are penalties for not being compliant, but being more compliant than others does not bring any advantage." Vincenzo Mirko Carlone, Head of AML and Financial Security, Banco Popolare, confirmed that sanctions screening activity for example resides "in a pre-competitive area". "Banks have to work together to define a high standard and a common basis to identify a real risk; from this level onwards an organisational structure needs to be put in place in any bank, according to the structure and risk appetite of that institution."

Standardisation is also very important in the compliance context, said Francesco Rescigno, Head of Operational Risk, Compliance and AML, ICCREA. "Risk appetite must be defined at bank level and it must be translated into organisational and technological solutions, which must aim at standardising the process of collecting information to support the evaluation of the individual. The challenge is to optimise business and controls - and standardisation is the main source of efficiency for a bank.

SWIFT's Compliance services - including Sanctions Screening and Sanctions Testing and The KYC Registry - are designed to provide common, standardised solutions to address industry pain-points. Bart Claeys, Head of the KYC Initiative, SWIFT, told delegates KYC activity is "painful for all banks in the correspondent banking space". "Today more than 7000 SWIFT users are involved in correspondent banking activities, which equates to more than 1.3 million correspondent relationships and document exchanges. The KYC Registry will increase efficiency and reduce cost by eliminating the need for banks to exchange documents directly with each of their counterparties."

Speakers agreed on the relevance of SWIFT in the compliance space. As UniCredit's Camozzo confirmed, "the community (the Italian community included) is convinced that compliance is an area in which SWIFT has to keep on investing". Commenting on the importance of the quality and completeness of the information in the KYC Registry, Tatjana Dobrovolny, Director, Expert AML & Sanctions Legal and Compliance, Raiffensen Bank International, told delegates that "SWIFT is a reliable and very professional partner, which will be able to provide certification of the information".

Turri of Intesa Sanpaolo agreed "it is of paramount importance to have certified information". "SWIFT is the only interlocutor that can help in resolving this issue," he added. "Today we work in a many-to-many context where everybody is asking the same thing of everybody else, and everybody needs to verify and validate information themselves.

"There is a tower which stands in the centre of the system, and this is SWIFT, who can help by providing a common and shared solution."