Efficient and effective transaction monitoring is an essential part of staying in compliance with various AML regulations around the world. However, as your transaction volume increases, manual transaction monitoring will no longer cut it. Learn how to: Build an effective automated transaction monitoring system Deal with alerts in a timely manner Utilize industry best practices

1. IdentityMind Global™ ©2016 All Rights Reserved
Digital Currency Webinar Series
Session 3:
“Transaction Monitoring:
Manual Strategies Don’t Scale”

2. Panelists
Angela Chartrand
Co-Founder
Sentinence
David Ripley
Co-Founder and CEO
Glidera
Paulina Islas
In-House Counsel
Bitso
Jose Caldera
Vice President of
Marketing and Products
IdentityMind Global

3. Angela Chartrand
• Co-Founder of Sentinence
• Angela Chartrand is known for her investigative skills, conducting thorough due
diligence and adherence to all jurisdictional regulatory requirements.
• In her 30 years of experience within the financial services industry, Angela has
been involved in developing industry standards, been part of Advocacy working
groups and has worked towards bridging the understanding and communication
gap between the regulator and the financial entity.
• Currently Angela sits on the Canadian MSB Association’s Industry Standards and
Advocacy Committees.

4. David Ripley
• Co-founder and CEO of Glidera, Inc., a digital currency venture headquartered in
Chicago
• More than 15 years of business experience, across multiple industries, including
tech and financial services
• Was most recently the Principal for The Boston Consulting Group, where he
advised C-level executive teams of Fortune 500 companies
• Previously held roles in software engineering and product management with Syclo,
a mobile enterprise software company acquired by SAP in 2012
• Earned his MBA from the Kellogg School of Management at Northwestern
University, and his BS in Electrical and Computer Engineering from the University
of Illinois
• Glidera offers a bridge to the existing financial system for digital currency
developers, providing a way for developers to directly integrate Bitcoin buy/sell
capabilities into their applications

5. Paulina Islas
• In-House Legal of Bitso
• Paulina is a former Mexican Ministry of Finance Official with years of experience
on financial regulation and anti-money laundering compliance.
• She wrote a thesis for a model law on how to regulate virtual currencies in Mexico
and is also experienced on Financial Services Free Trade Agreements, as she was
part of the Mexican negotiating team of the recently concluded TPP.
• Founded in 2014, Bitso set out to bring the potential of cryptocurrencies to Mexico
and LATAM. We prioritize security, transparency and best practice operations,
while breaking new ground with innovative product development. We’re the bridge
to Mexico’s new Digital Economy.

6. Jose Caldera
• Developed and marketed products for the last 20 years.
• Focus always been on the Enterprise, developing products and services for Information and
Payments Security, Risk Mitigation and Compliance.
• Experience in application and network security, payments, virtual currencies, anti-fraud, and
anti-money laundering.
• Developed and marketed products for a number of Silicon Valley companies, including
Securify, McAfee, and now IdentityMind Global.
• Earned a Masters of Science in Information Networking from Carnegie Mellon.
• IdentityMind Global is an e-commerce company offering an on-demand platform providing
risk management, anti-fraud and anti-money laundering services for online merchants,
acquiring banks, payment processors and gateways, payment service providers
(PSP/ISO/MSP,IPSP), digital currency exchanges, and financial institutions (banks, money
service businesses (MSBs), money transmitters).

8. TRANSACTION MONITORING

9. TRANSACTION MONITORING
MANUAL VS AUTOMATED PROCESS
Manual
 Small number of transactions able to be
reviewed
 Human error, mistakes that can cost you $$
 Slow process – time consuming - overwhelming
 Additional manpower may be required
 Memory recall – establishing criteria very hard to
accomplish
Automated
 Effective regardless of a few transactions or
hundreds/thousands of transactions
 Margin of human error less
 Save on Manpower – automated process cost
efficient and performance success rate is greater
 Automated systems allows for the tracking of
patterns
 Regulators like to see a well known automated
process is in place
2016-05-19Angela Chartrand - Owner - Sentinence - May 2016

10. ALERTS - I HAVE SO MANY - MANUAL REVIEW
 If running a manual transactional monitoring process - YOU WILL – YOU ALWAYS WILL!!
 Every transaction in the manual monitoring world is a POTENTIAL Alert
 Delays action being taken
 Have to take action but not finished reviewing all transactions
2016-05-19Angela Chartrand - Owner - Sentinence - May 2016

11. ALERTS – AUTOMATED PROCESS
2016-05-19Angela Chartrand - Owner - Sentinence - May 2016
 Automated transactional monitoring process only brings to sight those transactions that are defined “red
flags”
 Reportable – for effective management of review process
 Action can be taken in a timely manner

12. HOW LONG SHOULD IT TAKE ……..
 Clearing an alert can take a few minutes or it can take much more
 Define your alerts clearly in the set up process
 Initial Red Flag Default Set Up Time is a Time investment
2016-05-19Angela Chartrand - Owner - Sentinence - May 2016

13. OK SO I HAVE ALERTS – NOW WHAT?
2016-05-19Angela Chartrand - Owner - Sentinence - May 2016
Review Alerts
 Look for patterns
 Look for the “henchmen”
 Has this has happened before
 Does it make sense?
Document your findings
Escalate if needed – Compliance Officer – Compliance Manager – Risk Manager/Dept.
File a Suspicious Transaction Report to the appropriate Regulatory Body

15. Starting out can be difficult…
Starting out can be difficult

16. New companies can leverage some advantages
Business model Implementation

17. Simplicity is your friend
Customers
Products
Transaction thresholds

18. The implementation process
Transactions
Rules
Alerts
Cases
Reports

19. Technology platform critical to success
Automation Data Integration

20. Automation ensures coverage and manageability
Automation
Transactions
Rules
Alerts
Cases
Reports

21. Process and Data integration promotes thorough and efficient
operations
Customer identification
Fraud detection
Customer support

23. Transaction monitoring: What do
regulators typically look for
• Financial Institutions in México are required by Law to have automated systems
for transaction monitoring, which must have the following qualities:
• Record Keeping.
• Ensure integrity, availability, auditability and confidentiality of the information.
• Transaction grouping, monitoring and reporting.
• Operations classified by type of service and alerts generated by service-
inherent thresholds.
• Transaction consolidation and services grouping per client.
• Sanction and PEP lists screening.

24. Transaction monitoring: What are the
most important alerts and amounts?
• Mexican regulation contemplates several different alerts and amounts.
• The alerts vary depending on the type of institution and the financial medium that is used.
• The most common are the following:
• Relevant Operations Any type of transfer for value above 5,000 USD
• Reports on International Transfers Transfers above 1,000 USD
• Reports on Unusual Operations Suspected illegal activity
• Reports on Internal Operations Suspected officials or employee fraud
• Reports on operations above limits specified in the AML law.
• These reports are exclusive to cash, metals or bitcoin operations and for select
type of operations above certain thresholds

25. How to AML/KYC with Digital Currencies
• Digital currencies are still a fairly unregulated scene.
• Since their financial “nature” is still being determined, regulation has steered mostly towards
the uses of the currency.
• Lack of regulation or very little regulation lead to uncertainty which can result in:
• Extreme self-regulation, that could prevent business development.
• Too little self-Regulation, which could result in fines or even jail time.
• Given the lack of regulatory clarity every AML/KYC decision is both a business and a legal
one.
• Every AML/KYC setup impacts the customer support area. Support workers must be trained.

26. Creating a functional alert flow in the
Digital Currencies scene
• Determine the business model.
• Figure out whether it falls within any regulated financial activity.
• Set up the alerts in line with the regulated activity.
• Now the really important part:
• Adapting the rules to the different Digital Currencies business models.
• Discerning between weird traders and worrisome transactions.
• Determine which alerts require manual work and which don’t
• Work on a joint strategy with customer support.
• Differentiate when to go manual and when to do automated.
• Draw a workflow for every alert.

27. Alert! Alert! What’s next?
• Identifying the type of alert.
• Subjective: Generate a report specifying the type of activity or conduct that generated the
alert.
• Objective: determine whether is a self-imposed restriction or a legar requirement.
• Self imposed: transfer to customer support and contact client.
• Legal: every legal requirement should be automated up to the point where the STR
is generated.
• Notifying the authorities accordingly with the timeframe given. In Mexico it varies from a 24
hour period up to quarterly reports.
• Closing the account, if applicable.

28. Recap: Why manual strategies don’t
scale?
• Automated systems are required by Law.
• Exposure to human error or collusion.
• They prevent business growth.
• Manual work can create a customer support nightmare.

29. Q&A
Use the buttons on the top-left corner of
your screen to ask questions.