15 June 2017

Five questions to ask yourself about your DFS certification readiness

New requirements from the New York Department of Financial Services (DFS) provide an opportunity to strengthen sanctions quality assurance and testing programmes

Last year, the New York Department of Financial Services (DFS) announced the adoption of a new risk-based anti-terrorism and anti-money laundering regulation. The rules, which apply to banks operating in New York State, require banks to maintain appropriate watch list filtering and transaction monitoring programmes. Under the new rules, banks also have to ensure that their systems are working correctly and attest that their filtering and transaction monitoring programmes are compliant.

A new SWIFT info paper – Five questions to ask yourself about your DFS readiness – explains the new rules and how banks can see them as an opportunity to strengthen sanctions quality assurance and testing programmes.

The paper also explains how Sanctions Testing – SWIFT’s community based tool for testing sanctions filters and lists and optimising screening performance – can help banks streamline this process while addressing regulatory requirements.

Understanding the DFS requirements

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

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

As outlined in the paper, these requirements imply a number of questions:

  1. Should banks tackle testing and assurance in-house or work with an external provider?
  2. Do filter suppliers provide reporting to support such self-certification?
  3. How can banks align procedures with their internal risk appetite, policies and standards – and how can they demonstrate that they have done so?
  4. How can banks compare what they are doing against the rest of the industry?
  5. How can banks inspire confidence in their board and overseer that screening systems are functioning properly?

Understanding the answers to these questions and the options available can help banks comply with the new requirements, as well as derive related business and operational benefits in doing so.

For example, by understanding how their screening systems work, banks may be able to tune their systems more effectively and thereby reduce false positives. By documenting how their systems work, banks may also be able to make their compliance regimes more robust, resulting in greater confidence during regulatory examinations.

As such, the new requirements can enable banks to reduce costs while improving the effectiveness and efficiency of their whole environment.

By understanding how their screening systems work, banks may be able to tune their systems more effectively and thereby reduce false positives. By documenting how their systems work, banks may also be able to make their compliance regimes more robust, resulting in greater confidence during regulatory examinations.

SWIFT Sanctions Testing

Ultimately in order to certify screening performance, banks will need to testing their filters and lists and document that performance is in line with compliance policies and risk appetite. They can do such testing manually, hire an outside firm to do it, or take control of their testing and assurance process using SWIFT’s Sanctions Testing product.

Sanctions Testing enables banks to test, fine tune and understand their sanctions filters and list data, either at scheduled intervals or on demand. As well as delivering independent quality assurance of about the performance of transaction, customer and PEP filters, the service assesses filter models, fuzzy matching and false positives in order to improve performance iteratively.

Sanctions Testing enables banks to test, fine tune and understand their sanctions filters and list data, either at scheduled intervals or on demand.

Peer Assessment, an optional add-on, enables users to evaluate the performance of their filters against data from other participating users.

For more information, download the info paper.

Five questions to ask yourself about your DFS readiness

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Last update: 
9 June 2017

Five questions to ask yourself about your DFS readiness. New requirements from the New York Department of Financial Services (DFS) provide opportunity to strengthen sanctions quality assurance and testing programmes.

  • Compliance Info Papers
English

Extended reading

Compliance

Sanctions Testing

Sanctions Testing provides independent assurance that your filters are effective and aligned to your screening policies and business risk appetite. Iterative tuning reduces false-positives.
Compliance

Financial Crime Compliance

The challenge: Cutting the complexity and the cost of financial crime compliance.
The solution: A portfolio of community-inspired, shared and managed services.

Compliance Info Papers

Five questions to ask yourself about your DFS readiness

Five questions to ask yourself about your DFS readiness. New requirements from the New York Department of Financial Services (DFS) provide opportunity to strengthen sanctions quality assurance and testing programmes.

Download (179.66 KB)
English

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