Presentation on AML

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Presentation on AML

• 18-Feb-14

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Agenda

• Definition of AML
• Process of Money Laundering
• Extent of Problem
• Impact of Problem
• Key Features of AML System
• AML Framework
• Value Proposition

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(No Transcript)
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Money Laundering

• Definition The process whereby the origin of
  funds generated by illegal means is concealed

• Organized/Unorganized Crime

• Drug trafficking
• Corruption
• Fraud
• Terrorist Financing
• 1000 1500 b / y

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Financial Crime

• Definition A violation of law committed by a
  person or group of persons in the course of an
  otherwise respected and legitimate occupation or
  business enterprise."  Coleman (1989)
• Fraud Money Laundering

Money Laundering
Fraud
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Money Laundering Process

• Placement - Large volumes of small denominations
• Layering - Moving funds to obscure paper trail
• Integration - Reinvestment in legitimate business

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Financial Impact
Dec 2003 Abbey National 3.5 m
Jan 2004 Bank of Scotland 2.2 m
Mar 2004 Hudson United Bank 5 m
Apr 2004 Raiffeisen Zentralbank 0.3 m
May 2004 Riggs Bank 25 m
UBS 100 m
Jul 2004 Morgan Stanley 2.2 m
Sep 2004 Bank of Ireland 0.67 m

• Money Laundering
• Multimillion fines
• Closing the Institution
• Fraud
• FBI gt 300 by USA
• 5 -12 Insurance claims
• Individual case gt 10 b
• List of More fines

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Impact on Reputation
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Pressure on Financial Institutions

• FATF Recommendations
• EU AML Terrorist Financing Legislation
• Bank Secrecy Act
• Local AML Legislation (Notice 626)
• USA Patriot Act
• Sarbanes Oxley Act
• Basel II

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Addressing AML Requirements

• Know Your Customer
• Watch List Filtering
• Risk Scoring
• Transaction Monitoring
• Link Analysis
• Reports
• Case Management

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Know Your Customer

• Due Diligence Check
• Based on Account
• Based on Customer Type
• Define Mandatory Information Templates (To Define
  Compliance Level)
• Identify Missing Mandatory Information (Measure
  Compliance Level)

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KYC - Entity Scanning Filtration

• Entity Scanning Filtration
• Maintain internal Watchlist
• Manage Blacklists
• Storing watch lists/black lists/terrorist lists
  provided by regulatory authorities and also
  add/modify such lists
• Facility to import/update blacklists and create
  unlimited internal watch lists
• Entity Scanning Filtration features of KASTLE -
  AML- AML are designed for screening
  customers/counter-party against
  blacklists/watchlists
• During static data (New Customer, Customer
  update) upload
• During transaction (Ex- SWIFT Msgs.) upload
• Name Search Matching
• Two way list screening

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KYC - The Name Identity Search Problem
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Entity Scanning Filtration
White List
OFAC
Alert System
PEP
Watchlist
Customers
Black List
New Customers
AML Cell
Match Score
Blocked
gt X
Other Msgs
Name Extractor
Customer Update
lt X
No
Clean
Reports
Banking System
KASTLE - AML
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Risk Categorization

• Nature of Business
• Product
• Country / Geography
• Customer Type
• List
• Mode of Operation

• Source of Funds
• Customer Occupation
• Net worth
• Account Status
• Credit Rating

• Account Risk Categorization
• Low
• Medium
• High
• Extreme

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Risk Categorization

• If Customer A is a Retail Merchandiser who is an
  Indonesian National, has a corporate account
  offering wire transfer facilities and is the son
  of a top politician.
•  Retail Merchandising is classified as extreme
  risk business by the bank, Indonesian is a low
  risk geographic location, Corporate Account is
  classified as extreme risk product by the bank,
  since he is a Watch Listed entity by virtue of
  being a politically exposed person and Watch
  Listed entities are classified as extreme risk
  list by the bank.
• The account of Customer A is categorized as
  follows
• The calculated risk of the customer is 3.74 and
  the account of Customer A is categorized in to
  Extreme risk

Risk Parameter Weight age Risk Rating
Customer Business Risk 4 4
Bank Product Risk 3 4
Customer Geographic Risk 2 1
Customer Type Risk 1 2
List Risk 5 4
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Transaction Monitoring

• Set the Benchmarks
• Default Benchmarks
• Branch group account group
• Customer type
• Nature of Business
• Account risk rating
• Country code
• System Generated Benchmarks (Entity Profiling)
• Specific Benchmarks (Establish Entity Profile)
• Identify Normal Behavior
• Set Alert Parameters
• Alerts
• Real-time (Patterns)
• Non Real-time (Scenarios)
• Subjective

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Alert Management Facility

• Allocation of Alerts to different analysts
• Alerts can be pre-assigned or assigned post alert
  trigger
• Monitor action taken on alerts
• Record of any action taken on an alert is
  maintained.
• An action can constitute any/all of the
  following
• Alert assignment
• Marking a false positive
• Making observations/comments
• Case investigation

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Pooling of alerts

• Provision to pool alerts branch wise/region
  wise/circle wise/bank wise/nature of transaction
  wise etc.
• Filters allow to view alerts
• Branch wise
• Customer wise
• for a specific alert type, instrument,
  transaction, etc.
• View available on alerts branch wise/region
  wise/circle wise and for the entire bank

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Link Analysis

• The system has Link analysis feature to provide
  linkage of suspicious transaction flows
• Identify Links
• Static Data Duplication
• Transactional
• Listed Entities
• Establish Links
• Transactional List Match
• Group Accounts
• Monitor groups

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Reports

• CTR as per regulatory format
• STR as per regulatory format (Reporting to STRO)
• Other pre-defined Reports
• User-defined Reports

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Case Management Schematic
Top Management
Final Decision istaken Case Is Closed
Chief Compliance Officer (CCA)
CCA assigns Alert/Case to Officer

• Customizable Work Flow
• Support VOIP
• Interface with FIU /Central Bank
• Investigative Reports

Investigator investigates attach evidence
Decision MakersMakes Decisionwith Evidence
ReviewerReviews attach Evidence
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KASTLE - AML Framework
KASTLE - AML
CONSULTING
Reports
AML FRAME WORK
ENTITYRESOLUTION
CASE MANAGEMENT
TRANSACTION MONITORING
BUSINESS INTELLIGENCE
Fraud Detection
COMPLIANCE
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Thank You