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SWIFT broadens, deepens its financial crime compliance services portfolio

SWIFT broadens, deepens its financial crime compliance services portfolio

27 September 2016

Utility services help banks address regulatory change and evolving needs throughout the correspondent banking relationship lifecycle.

Expanding its compliance services suite is one of three pillars in SWIFT’s 2020 strategy. As regulations change, so do the requirements of SWIFT’s customers.

“We continue to see a move beyond mere ‘box-ticking’ to embedding compliance firmly in institutions’ business practices and cultures,” says Brigitte De Wilde, head of financial crime intelligence and services at SWIFT. “SWIFT’s vision is to provide a cohesive suite of services that address the compliance requirements of financial institutions throughout the customer lifecycle.”

For ease of presentation, De Wilde divides the life cycle into two stages: customer onboarding; and the ongoing customer relationship. A range of compliance processes must take place during both stages in line with the bank’s risk appetite and regulatory obligations.

Starting out with compliance

Prior to onboarding a new correspondent, a bank will typically identify and perform initial risk assessments on a number of prospects. At this stage, Bankers World Online, part of the SWIFTRef portfolio, helps banks prospect for potential commercial counterparts that fit the risk profile they want.

Once a potential counterpart has been selected, client identification and Know Your Customer (KYC) activities are essential to ensure that the counterpart does indeed meet the risk parameters set by the bank. Here banks can count on The KYC Registry, SWIFT’s centralised repository of standardised due diligence information about correspondent banks, funds distributors and custodians.

The KYC Registry provides an efficient, shared platform for storing, managing and exchanging standardised KYC data. SWIFT has worked with the world’s largest correspondent banks to define a set of data and documents that addresses KYC requirements across multiple jurisdictions. Bankers World Online has been integrated with The KYC Registry to provide easy access to an even broader, more granular set of KYC information.

“Industry adoption of The KYC Registry has been tremendous,” says Bart Claeys, head of KYC compliance services at SWIFT. “The Registry is being used by more than 2,800 correspondent banking and funds institutions to reduce the cost and complexity of KYC activities, and increase the effectiveness of their KYC programmes.”

In an environment where ‘de-risking’ is increasingly seen by many large transaction banks as a necessary process to meet their own compliance goals, the Registry provides a line of defence for banks in higher-risk markets, enabling them to demonstrate transparency and that they have their own robust checks in place.

Introducing Name Screening

As announced Monday at Sibos, SWIFT is introducing a Name Screening service to enable banks and corporates to screen their client, supplier or employee databases for names on sanctions, politically exposed persons (PEP) and private lists. The service will provide online search engine-style lookup of individual names as well as automated batch screening of entire databases.

“As a hosted service, Name Screening will provide a powerful screening solution that’s as simple to use as a search engine, along with the ability to automate database screening as part of business as usual AML processes,” says Nicolas Stuckens, head of sanctions compliance services at SWIFT. “Name Screening, together with Sanctions Screening, Sanctions Testing and new list management services, will form a cohesive Sanctions Utility that delivers tools our customers need in order to better manage sanctions compliance across their organisations and throughout customer relationships.”

Name Screening leverages SWIFT’s highly successful, industry-driven utility model to deliver intuitive, easy-to-use case management, a world-class screening engine and advanced list technology. SWIFT will standardise public sanctions lists to increase accuracy and reduce false positives and will source politically exposed persons (PEP) lists from industry leader Dow Jones. Online lookup will be available in January 2017, with the full database screening solution to follow in Q3 2017.

A final step in onboarding is the setup of SWIFT’s Relationship Management Application (RMA) and RMA Plus. These SWIFT-mandated authorisations let users specify which types of messages they are willing to exchange with specific counterparts, and blocks any traffic not meeting those criteria. As such RMA is increasingly seen as a compliance control. Indeed, some regulators require banks to do full due diligence on their correspondents whenever an RMA is present, regardless of whether a business relationship is actually in place.

Relationship management

Once counterparties have entered into a commercial relationship, different requirements come into play. Here, SWIFT provides services to screen transactions, track ongoing behaviour and monitor risk in customer relationships.

“SWIFT’s vision is to provide utility solutions that meet our customers’ compliance needs throughout the customer lifecycle,” says Nicolas Stuckens, head of sanctions compliance services at SWIFT.

These requirements include screening transactions between counterparties, testing that screening systems are performing properly, performing ongoing KYC and Customer Due Diligence (CDD) activities, and maintaining a global overview of transactions and correspondent relationships in order to identify and investigate areas of potential or elevated risk.

SWIFT already offers services in each of these domains.

Sanctions Screening, the first compliance service launched by SWIFT, has surpassed 540 customers. A fully hosted solution, Sanctions Screening checks financial transactions against more than 30 watch lists to ensure compliance with sanctions regulations. It simplifies sanctions compliance by providing a full solution that includes a screening filter, up-to-date sanctions lists, case management and quality assurance.

Many institutions already have complex and highly customised screening systems in place, but they may lack the assurance that these systems are working. Here SWIFT offers Sanctions Testing, which enables banks to test and tune the effectiveness and efficiency of their transaction and name screening filters and lists.

Sanctions Testing helps banks address increasingly strict regulatory requirements, such as new rules from the DFS in New York which will require institutions to test and certify the performance of their screening systems and programmes.

Knowing who you are doing business with – and understanding whether and how those relationships are evolving – is at the heart of compliance programmes. More than 2,800 correspondent banking and funds institutions are using The KYC Registry to reduce the cost and effort of ongoing due diligence.

By maintaining a standardised set of each member institution’s KYC data and documentation in a single, secure location, the Registry is driving major efficiency gains during annual reviews – and customer onboarding.

An expanding analytics suite

SWIFT transaction data plays an important role in evaluating behavioural changes by correspondents, and SWIFT provides advanced data analytics tools to help customers fully leverage such insights.

Compliance Analytics provides visibility on end-to-end flows between different customers, highlighting unusual or high-risk behaviour and risk concentration. Used by more than 30 of the world’s largest banks, it also gives banks unique visibility on activity shares in high risk corridors, and into their Relationship Management Application (RMA) authorisations, enabling the identification of dormant or unused relationships that might pose unnecessary compliance costs, or potential risk.

“Compliance Analytics provides unique visibility on a financial counterparties’ transaction activity and enhances banks’ efforts to prevent illicit behaviour,” says De Wilde. “It helps you monitor your historical data regularly to identify trends, spot anomalies and spikes, and detect potential policy breaches.”

SWIFT recently expanded its Compliance Analytics suite with a new Payments Data Quality service that helps banks comply with FATF Recommendation 16 and related regulation that tightens requirements around originator and beneficiary data in payments messages. The service helps banks evaluate the quality of originator and beneficiary details in the payments they send and receive, and highlights correspondents and branches whose payments tend to lack the required data. Another addition to the Compliance Analytics portfolio will be AML Correspondent Monitoring, which will be launched early next year. Designed to address the specific compliance requirements of correspondent banks, the module will provide Risk metrics for KYC reviews, and Risk assessments and rich AML transaction monitoring using a more granular approach than traditional AML transaction monitoring systems.

SWIFT is also introducing Daily Validation Reports, a new tool designed to supplement customers’ existing fraud controls. Based on SWIFT’s records of customers’ messages, the Daily Validation Reports will give customers an accurate summary of their message flows, affording them an independent means of verifying their messaging activity and detecting any unusual patterns, thereby enhancing their ability to identify possible fraud attempts and improving the likelihood they can cancel any fraudulent transfers.

With so many factors in play, financial crime compliance is to some extent a moving target. “Across the entire portfolio we continue to evolve to meet changing requirements,” says De Wilde. “We provide use cases on how best to deploy each product and tool, but each bank will apply them in different ways. What SWIFT is doing is to provide an effective technology response to a range of compliance and business requirements.”

*  Download your copy of the latest edtion of SWIFT at Sibos magazine to read the latest news from the conference!

SWIFT at Sibos - Issue 2