“AML Technology and Effective Investigations Before and After the Alert” Moderator: Martin Petrella, AML Principal, Deloitte Financial Advisory Services LLP Speakers: John F. Tobon, Assistant Special Agent in Charge, Financial Investigations Division, Homeland Security Marcy Forman, Managing Director & Global Head, Global Investigations Unit, Citigroup Michael B. Flynn, Managing Director, AlixPartners, LLP Sean O’Malley, VP and Deputy Chief Investigator, Enforcement Division, Federal Reserve Bank of New York Steve Butzine, Director, AML Compliance Officer - AML Operations, TIAA-CREF Financial Services AML Technology and Effective Investigations -Before and After the Alert February 20, 2014 Martín Petrella Principal Deloitte Transactions and Business Analytics LLP Transaction Investigation Lifecycle SAR Filed Law Enforcement investigates customer Law Enforcement / Bank interaction over customer Transaction is decisioned (Bank) Transaction is investigated 3 Investigative Process 1. 2. 3. 4. 5. 6. Review transaction Identify patterns/ transactional history Compare activity to customer KYC profile Research counterparts Request additional Information Decision (investigator) Copyright © 2013 Deloitte Development LLC. All rights reserved. Panel Takeaways 1. What you can do to improve your investigation process 2. Areas you can improve your investigation process in advance of your next exam 3. How you can better your relationship with Law Enforcement 4 Copyright © 2013 Deloitte Development LLC. All rights reserved. Martín Petrella Principal Deloitte Transactions and Business Analytics LLP [email protected] About Deloitte As used in this document, “Deloitte” means Deloitte Transactions and Business Analytics LLP, an affiliate of Deloitte Financial Advisory Services LLP. Deloitte Transactions and Business Analytics LLP is not a certified public accounting firm. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. AML Investigations – Using Technology for Investigations Steve Butzine Director, AML Operations TIAA - CREF [email protected] Overview • How are AML alerts generated • How cases becomes SARs • Documentation requirements Alert Generation – “Out of the box?” • • • • • Rule Selection Methodology Risk Assessment Alignment “Statistically Knowing Your Customer’s Transactions” Parameter Validation - Tuning SAR Statistical Analysis Investigation Process – Where is the Art of the Investigation? • Focus is “SARcentric” • Process Process Process – Lean Processing – KPI’s, KRI’s, Metrics, Capacity Analysis • Quality Assurance vs. Quality Control Documentation - “Far beyond the Case” • System/Process Methodologies – – Models, Rules, Tuning, Data Validation • Policies, Procedures, Standards, Job Aids • Unusual vs. Suspicious Activity • Finally, supporting documentation AML TECHNOLOGY & EFFECTIVE INVESTIGATIONS – BEFORE AND AFTER THE ALERT Marcy Forman Global Investigations Unit, Citi February 2014 Investigative Process GIU works in conjunction with AML Technology, KYC, and Operations to identify high-risk, cross-sector clients of concern for review and disposition. Technology Global Repository of Customer Accounts Technology Global KYC Systems HIGH RISK CRITERIA • Senior Public Figures • Embassies • Private Banking / High Net Worth • Money Service Businesses • Correspondent Banks & Development Banks • Other High Risk Categories Case Mgmt. Operations Global Investigations Unit “CROSS SECTOR LIST” CRITERIA • Triage/Assessment • Client Relationship in Multiple Regions / Businesses • Prior Investigations & SARs • Negative News Case Mgmt. • Investigation • Resolution • Feedback • Do Not Do Business Example of a GIU Investigation CORRESPONDENT BANK STRATEGIC REVIEW SPF C. Bank & Dev. Bank Embassy MSB CPB & AHS High Risk Accts Cross Sector List Correspondent Bank One (Headquartered in Russia) Correspondent Bank Two (Headquartered in Greece) Computer Exporter Computer Exporter Clothing Manufacturer Security Device Dealer Freight Shipping Real Estate Company Individual Jet Ski Company Car Exporter Electronics Distributor Car Dealer Individual Auto Parts Exporter Wallpaper/Textiles Real Estate Company Auto Parts Exporter Travel Agency Auto Parts Supplier Industry Unidentifiable Car Dealer Electronics Jewelry /Watch Dealer Car Exporter Car Dealer Meat Trader Auto Parts Exporter Car Exporter Car Dealer Jewelry/Watch Dealer Private Investment Auto/Freight Shipping Trading Company Bakery / Furniture Real Estate Company Auto Parts Retailer User Car Dealer Computer Exporter Chemical Trading Mining Equipment Communication Services CROSS SECTOR CASE Precious Metals/ Catalytic Converters Dealer Furniture/Appliance Store Building Materials Supply Precious Metals Dealer Precious Metals Dealer Jewelry/Gold Scrap Metal Recycling Jewelry Manufacturer Precious Metals Refiner Precious Metals Dealer Jewelry Exchange/Refiner Nested Correspondent Bank Activity • The true originator of funds sent through shell companies cannot be confirmed. Ultimate Beneficiary • Many of the shell companies are located in low-risk jurisdictions to obscure the actual source of funds in high-risk jurisdictions. US Bank Correspondent bank customer Nested Bank Accounts • Numerous shell companies, all located at the same address, wire their funds through correspondent bank customers. • Many of the companies were tied to two individuals linked to cases of illegal activity, including Ponzi schemes, bid rigging scandals, and illegal weapon shipments. Shell Corporations Unidentifiable Source of Funds Frequently established by Nominee Incorporation Services* • Frequently located in a country different from the shell corporations • Often in high-risk jurisdictions (e.g., Lithuania, Cyprus, Russia) * Nominee Incorporation Services are intermediaries that establish offshore shell companies and bank accounts on behalf of foreign clients. Investigations Originating from GIU Review of a Correspondent Bank Chemical Trading Freight Shipping Car Exporter CB Car Dealer CB Real Estate Industry Unidentifiable Car Dealer CB CB Car Exporter Car Dealer Real Estate CB CB Unknown Source of Funds CB Electronics Distributor CB Auto Parts Exporter CB CB Real Estate CB CB Precious Metals/ Catalytic Converters Car Exporter Computer Exporter CB CB Computer Exporter Computer Exporter Bakery/Furniture CB Current correspondent client Previously exited correspondent client AML Technology and Effective Investigations – Before and After the Alert – Q & A Moderator Martin Petrella AML Principal, Deloitte Financial Advisory Services LLP Speakers John F. Tobon Assistant Special Agent in Charge, Financial Investigations Division, Homeland Security Marcy Forman Managing Director & Global Head, Global Investigations Unit, Citigroup Sean O’Malley VP Deputy Chief Investigator, Enforcement Division, Federal Reserve Bank of New York Steven C. Butzine Director, AML Compliance Officer AML Operations, TIAA-CREF “AML Technology and Effective Investigations – Before and After the Alert” Sean O’Malley V.P. and Deputy Chief Investigator/Enforcement Unit February 20, 2014 Regulatory Concerns • In order to have an effective program, the bank needs to be able to understand the risk profile of customers so they can focus on the activity of the riskiest customers. • Not properly risk rating clients has caused many institutions to incur MRAs, MRIAs, and on occasion, has been the root cause of AML enforcement actions. Regulatory Concerns • Risk ratings for affiliates need to be treated as if you are reviewing a new client. • Many financial institutions consider their affiliates to constitute low or medium AML risk, even if they are located in a high risk location, or if they provide high risk services to their clients (correspondent banking services, banking foreign MSBs or exchange houses). This can cause gaps in the analysis of high risk transactions processed by affiliates. Regulatory Concerns •Limitations • • • of Technology If KYC /CDD info is incomplete or does not go through enough corporate entities to determine the true Beneficial Owner – BSA gaps could go undetected. Not all financial institutions filter all their transactions for ML risks– undiagnosed gaps can cause a bank to miss vital transactions and could cause an enforcement action. Book Transfers need to be included in monitoring or vital patterns of activity could be missed. Regulatory Concerns •Limitations • • of Technology Did your bank implement the AML vendors software and accept the default detection methodologies, or were the rules customized for your client base? Lack of customization has caused problems for many institutions. Do you monitor for suspicious activity in cash and cash like transactions? ACH Transactions? Wires? Remote Deposit Capture? Significant Changes in Activity? Do these systems talk to each other? Regulatory Concerns •Limitations • • of Technology If an institution has multiple systems from mergers/acquisitions or other reasons, the AML systems should to be able to aggregate activity. Gaps in systems aggregation can cause substantial BSA risk. Regulatory Concerns - The lack of transparency in Cover Payments processed by Correspondent Banks has caused Money Laundering and Sanctions Risks. - Since Nov 2009, MT202COVs provide names of originators, beneficiaries & their financial institutions – enforcing compliance on banks processing Cover Payments is a challenge. - Are you sure that your respondents are compliant? Regulatory Concerns • • • Understand all new technologies and how they impact BSA activities. Are you properly mapping unusual cash activity, such as deposits and withdraws on the same day in locations hundreds/thousands of miles apart. Are your originators and beneficiary payments listed in cover payments from SWIFT MT202COVs being aggregated with serial payments processed through MT103s? If not, your monitoring thresholds might be rendered ineffective. Other Trends Monitoring for Trade Based Laundering • Do you have monitoring detection scenarios to detect Trade Based Money Laundering patterns? • Are you looking for red flags such as payments for goods where importers don’t live in the originating country; Traveler’s checks and money orders in round $ under $3,000? • Do payments begin & end when foreign import business with US account receives payment from a customer in an unusual location? Regulatory Concerns • Examiners can only confirm that a bank has good processes if the activity is documented. • Archive records and have an audit trail for all activity conducted to determine if the alert can be closed, and justification for that decision. • Be very concerned about Auto-Closing Alerts – this is a sign that monitoring may not be effective, or there are not enough personnel to review accurate alerts – both are problematic. [email protected] 212 720-5573 FIBA Annual AML Compliance Conference AML Technology and Effective Investigations Before and After the Alert February 20, 2014 28 Reporting Trends in South Florida • Black Market Currency Schemes – Black Market Peso Exchange (Colombia) – Venezuela Black Market – Doleiro (Brazil) – Dolar Blue (Argentina) • Third Party Payments – Consumer Electronic Resellers • Customs Fraud Case Study: Company “A” Company “A” (CA) incorporates in the U.S. CA is a subsidiary of a company established in South America country “1” (SA1). SA1 is involved in exporting to South America country “2” (SA2). So far, so good… Case Study: Company “A” • CA opens up bank accounts in U.S. and starts receiving wire transfers from companies in SA2 on behalf of its subsidiary company in SA1. • Payments are represented as ‘Transportation Charges’ for exports from SA1 to SA2. • Funds are then transferred to countries in the Caribbean, South America, Central America and the Middle East. Case Study: Company “A” What we found: • CA was formed solely for the purpose of evading foreign currency restrictions in SA1. • The scheme involved: – Over Valuation – False Invoicing – Immigration Fraud Case Study: Company “A” • Uncovering the scheme involved financial, customs and immigration information across multiple jurisdictions. John F. Tobon Assistant Special Agent in Charge Homeland Security Investigations (305) 597-2763 [email protected] 34 “AML Technology and Effective Investigations – Before and After the Alert” Moderator Martin Petrella AML Principal, Deloitte Financial Advisory Services LLP Speakers John F. Tobon Assistant Special Agent in Charge, Financial Investigations Division, Homeland Security Marcy Forman Managing Director & Global Head, Global Investigations Unit, Citigroup Sean O’Malley VP Deputy Chief Investigator, Enforcement Division, Federal Reserve Bank of New York Steven C. Butzine Director, AML Compliance Officer AML Operations, TIAA-CREF
© Copyright 2024 ExpyDoc
