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Transaction filtering, systems testing and annual certification: driving business benefits

Transaction filtering, systems testing and annual certification: driving business benefits

Financial Crime Compliance,
25 August 2016

SWIFT paper outlines implications of new DFS regulation, and the potential for banks to develop ongoing review programmes that enhance processes and create business efficiencies

Download new SWIFT info paper DFS certification requirements

On 30 June 2016, the New York Department of Financial Services (DFS) – which supervises financial institutions and insurance companies – announced the adoption of a risk-based anti-terrorism and anti-money laundering regulation.

The new regulation has four main components. Banks need to:

  • Maintain an appropriate transaction monitoring programme
  • Maintain a watch list filtering programme
  • Perform tests and ongoing analysis to ensure that systems are working correctly
  • Submit an annual board resolution or senior officer compliance finding stating that the bank’s transaction monitoring and filtering programmes comply with the regulation.

A new info paper from SWIFT explains how the new testing and certification requirements may impact banks with operations in New York.

In order to meet the DFS certification requirements, banks will need to have appropriate testing and validation procedures in place for their transaction monitoring and watch list filtering programmes. Watch list filtering can refer to screening of transactions against public sanctions lists, as well as screening customers against sanctions and politically exposed persons (PEP) lists.

By putting proper processes in place, banks may also be able to use their systems more effectively. The additional controls needed under the new regulation may make banks more aware of what their systems can actually do.

In practical terms, banks may be able to tune their systems more effectively. Banks may also be able to reduce the number of false positives or erroneous alerts coming out of their AML and filtering systems, leading to more efficient and effective processes.

How SWIFT can help

The new regulation affects the international banking community – and as such, a community approach is needed in response. Industry-defined standards, collaborative services and community-inspired solutions are needed to meet these complex challenges.

SWIFT has developed a portfolio of hosted utility services that are helping its members enhance the effectiveness and efficiency of their financial crime compliance programmes.

Banks can use SWIFT’s Sanctions Testing service to test, fine tune and understand their sanctions filters. As such, Sanctions Testing gives banks the confidence needed to certify compliance with Section 504.3 of the new regulation.

Sanctions Screening, SWIFT’s transaction screening solution, combines a best-in-class filter with a comprehensive database of sanctions lists which is updated automatically. Sanction Screening is tested using Sanctions Testing, giving banks additional transparency as well as the benefits of high-quality assessment reporting.

Using SWIFT’s new Payments Data Quality service, banks can validate that the originator and beneficiary information in their payments messages is correct. As well as helping with straight through processing, this also increases the efficiency of the filter.

Download the new SWIFT info paper about the new DFS testing and certification requirements .

Systems testing and annual certification: driving business benefits