Watch list filtering involves screening names and addresses against sanctions (ex. OFAC, UKHMT, OSFI etc.) and other third-party and internal lists for the purpose of identifying embargoed and prohibited individuals and entities, PEPs and other high risk entities. In addition to sanctions and PEPs, SBS also provides screening for negative news.
Transaction monitoring involves the scanning and analysis of SWIFT, payment and other financial transactions to identify unusual or suspicious activity for reporting, as required by applicable AML law. Transaction monitoring differs from watch list filtering in that it requires interpretation and judgment to determine and identify unusual activity and unusual patterns of activity or transactions.
The term "politically exposed persons" ("PEP") applies to persons who perform important public functions for a particular jurisdiction. The definition used by regulators is usually very general and leaves room for interpretation. For example, the Swiss Federal Banking Commission, in its guidelines on money laundering, uses the term "person occupying an important public function;" - the US interagency guidance uses "senior foreign political figure" and the BIS paper Customer Due Diligence for Banks says "potentates."
The term should be understood to include persons whose current or former (rule of thumb is one year after giving up any political function) position can attract publicity beyond the borders of the country concerned and whose financial circumstances may be the subject of additional public interest. In specific cases, local factors in the country concerned, such as the political and social environment, should be considered when deciding whether a person falls within the definition.
The following examples are intended to serve as aids to interpretation:
- Heads of state, government and cabinet ministers
- Influential functionaries in nationalized industries and government administration
- Diplomats and ambassadors
- Senior judges
- Senior party functionaries
- Senior and/or influential officials, functionaries and military leaders and people with similar functions in international or supranational organizations
- Members of ruling royal families
- Senior and/or influential representatives of religious organizations (if these functions are connected with political, judicial, military or administrative responsibilities)
You can’t. No government or international agency provides one. Governments list their own high ranking PEP entities. There is no “official” list, however, private companies do provide this database.
A REP is a Reputationally Exposed Person found when screening adverse media/negative news.
Exposure ranking is an objective method for calculating PEP prominence and notoriety in order to minimize a financial institution’s vulnerability to financial and reputational risk. SBS’ SAFE Exposure Index® (SAFE EI) measures the relationship between PEPs and their underlying attributes, information sources and related entities.
PEPs are common names with no consistent definition. Identifying Politically Exposed Persons can be a difficult undertaking, particularly if the customer fails to provide important information or even gives false information. Despite all the banks' efforts at recognizing Politically Exposed Persons, it is a fact that they do not have the necessary powers, means nor information at their disposal to detect such persons. Banks are restricted in what information they can obtain. They must rely on the information clients give them and that can be gleaned from business documents or from the media. In particular, when close associates or families of a Politically Exposed Person open a business relationship with a bank, it is often impossible to establish that relationship — a "PEP relationship" — on the basis of the limited information available to the banks.
In addition to the standard KYC procedures, the following prompts might be appropriate to recognize a Politically Exposed Person:
- The question of whether clients or other persons involved in the business relationship perform a political function should form part of the standardized account opening process, especially in cases of clients from corruption-prone countries.
- To let client advisor deal exclusively with clients from a specific country/region might improve their knowledge and understanding of the political situation in that country/region.
- The issue of Politically Exposed Persons should form part of the regular KYC training programs.
- Banks may use databases listing names of Politically Exposed Persons and their entourage. In this regard, it would be helpful if authorities issuing directives on how to deal with Politically Exposed Person would support the banks.
The new vendor management guidance issued by the Federal Reserve and the Office of the Comptroller of the Currency broadens the scope of managing third-party relationships. It requires banks to clarify responsibility and better understand and assess outsourced risk. Banks will be expected to step up due diligence and vetting of new vendors as well as scrutinize existing relationships to ensure heightened requirements for documentation, security, reporting, performance benchmarks and other criteria are met.
De-risking is a strategy to remove from an institution's customer portfolio all accounts deemed high risk. While some institutions find it more cost effective to remove entire categories of potentially high-risk customers in an across-the-board approach, other institutions take a more balanced approach that targets specific high-risk customer accounts.
The SAFE Exposure Index® (EI) from SBS is a method for objectively ranking the relative "political exposure" of the politically exposed in a PEP database on a daily basis. By selecting a subset by EI rank (i.e. the top x% of PEPs by EI rank) financial institutions maximize their PEP coverage and alert relevance for any given level of filtering capacity. SBS was awarded a patent in 2011 and the methodology has been proven to satisfy audit and regulatory requirements.
SAFE Strength Index is a probabilistic framework for alert prioritization and false positive elimination. It rates the strength of potential matches returned by the filter by evaluating name match quality, name commonness, date of birth and geographic information for points of corroboration and conflict and identifies the most likely to be true matches in large customer databases. When combined with SAFE EI, it delivers powerful alert scoring results.
Yes, in addition to providing the technology to support comprehensive compliance and risk management programs, SBS offers professional services, including consulting, to help you design a cost effective KYC and EDD program that meets all regulatory requirements. An important component of any customer screening program is the management of the various lists, which are updated by government agencies. SBS offers options for a list management service or utilities for managing these lists in-house and will help you determine the best option for your program.
SBS will partner with you early in the project lifecycle to ensure well coordinated planning and effective communication with your business and technical resources. For customer site deployments, infrastructure issues and hardware prerequisites are the sole responsibility of our clients, however, we will offer recommendations to help you optimize performance and maximize your investment. Alternatively, SBS offers a hosted option.
The next generation of ASP is SaaS (Software as a Service). SBS hosts SAFE Advanced Solutions®, a full suite of products and services, at Rackspace®. This SaaS option provides a dynamic surveillance model for KYC and EDD which reduces total cost of ownership and time to production while maximizing resource utilization.