Customer Due Diligence: Improving Screening Processes for OFAC Entities and Other High Risks

Customer Due Diligence: How to bring clarity to screening for OFAC Sanctioned Entities and other High-Risk Entities April 7, 2009 Shaun M. Hassett, CAMS National Risk Specialist Clarity Risk & Compliance Advisors

Presentation Outline ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

FinCEN and OFAC Compared ,[object Object],[object Object],[object Object],[object Object]

FinCEN and OFAC Compared ,[object Object],[object Object],[object Object],[object Object],[object Object]

FinCEN and OFAC Compared ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

FinCEN and OFAC Compared ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

FinCEN and OFAC Compared ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

OFAC Overview Country-Based Programs Cuba, Iran, Sudan Regime-Based Programs Burma Belarus, North Korea, Iraq I and Iraq II Liberia (former regime ) List Based Programs Narcotics Trafficking, Diamond Trading, Anti-Terrorism, WMD, Balkans, Syria, Lebanon, Congo, Ivory Coast, Zimbabwe Sanctions Program Categories

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],OFAC Overview

So who or what is a ‘SDN’? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],OFAC Enforcement Guidelines

[object Object],[object Object],[object Object],[object Object],[object Object],OFAC Enforcement Guidelines

OFAC Sanctions ,[object Object],No Action Warning or Cautionary Letter Revocation of a License Civil Penalties Criminal Referrals

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],OFAC Enforcement Guidelines

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],OFAC Enforcement Guidelines

Voluntary Self-Disclosure Egregious Case (1) One-Half Transaction Value ($125k Cap) No Yes No Yes (3) One-Half Statutory Maximum (2) Applicable Schedule Amount ($250k Cap) (4) Statutory Maximum Base Penalty Calculation OFAC Enforcement Guidelines

Example of Egregious Violation: Lloyds TSB Bank PLC ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Lloyds TSB Bank Issue: Stripping / Modifying Data in Payment Messages ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],Where Do We Start ?

Comprehensive Process ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Implementation ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Implementation ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Implementation: ,[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],Implementation: OFAC and other ‘List Data’

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Implementation: OFAC Data

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Implementation: OFAC Data

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Implementation: What about other lists ?

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Implementation: Risk Assessment

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Implementation: Risk Assessment

[object Object],[object Object],[object Object],[object Object],[object Object],Implementation: Risk Assessment

Risk Management Matrix Courtesy of SightSpan - Used with Permission

Implementation: Risk Assessment ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

What areas should be considered? Example operational areas in Banking & Securities: ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],What areas should be considered? Example operational areas: Insurance

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],What areas should be considered? Example operational areas: Securities

NEW IAT RULES ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

What is an IAT, and what is all the fuss about ? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],New Record Keeping Requirements for IATs

New Record Keeping Requirements for IATs ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

OFAC Screening Indicators for IATs ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Optional Fields for OFAC Indicators ,[object Object],[object Object],[object Object],[object Object],[object Object]

OFAC Issues (cont’d) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Cover Payment Basics… ,[object Object],[object Object],[object Object],[object Object]

The cover payment Ordering customer’s bank Beneficiary Bank Sender’s USD Correspondent MT 202 Receiver's USD Correspondent CHIPS/Fed MT 910/950 Ordering Customer Beneficiary * Example in USD Also valid for other currencies that apply cover (mainly GBP) MT 103 in USD*

The issue MT 103 in USD Ordering customer’s bank Bene’s bank Sender’s USD Correspondent MT 202 Receiver's USD Correspondent CHIPS/Fed MT 910/950 Ordering Customer UNKNOWN PARTIES IN THE COVER PAYMENT Beneficiary

Implementation of Message Format Changes ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Our Dilemma: Screening the Data ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],“ Find the bad guys, stop the money flow” is much easier said than done.

Understanding Our Own Data ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Data preparation is an investment… not an expense

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Mining Your Data

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Mining OFAC or other Caution List Data

Mining Names ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Mining Addresses, IDs and/or Dates of Birth

Summary ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Have Questions or Need Additional Information ? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Customer Due Diligence: Improving Screening Processes for OFAC Entities and Other High Risks

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Customer Due Diligence: Improving Screening Processes for OFAC Entities and Other High Risks