Fraud, Money Laundering, Terrorism

& Compliance in the Financial

Services Industry
Automated Solutions to an Integrated Problem

27 April 2004 CFS Division Day – New York 1

Product Demonstrations

 Patriot Act Connection (PAC)

– One component of an integrated set of financial intelligence
solutions for banks, thrifts, and credit unions.

 Compliance EYE
– Compliance EYE is a web-based (ASP) securities trade
surveillance system

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The Components of the Problem
FRAUD

 Reputational Risk

 Bottom Line Monetary Losses

 Lawsuits

 Prison
– Before 9/11 few agency
examination issues

Fraud

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The Components of the Problem
MONEY LAUNDERING

 Reputational Risk

 Lawsuits
Money Laundering

 Prison
– Typically little or no
money loss
– Before 9/11 aimed at
drug enforcement and
tax evasion

Fraud

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The Components of the Problem
TERRORISM
Terrorism
 Reputational Risk
– 9/11
– Not typical “hiding Money Laundering
illegal money”
laundering
– Involved very small
dollar amounts

Fraud

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The Components of the Problem
COMPLIANCE
USA
PATRIOT Act Terrorism
 Reputational Risk

 Compliance
Money Laundering
– Fines
OFAC
– Loss of charter
– Loss of GLB powers
Bank
– Multiple agency Secrecy
enforcement actions Act

 Prison
Fraud

27 April 2004 CFS Division Day – New York 6

Fraud, Money Laundering, Terrorism &
Compliance: An Integrated Problem
USA
PATRIOT Act Terrorism

Money Laundering

That requires an OFAC

integrated solution Bank

Secrecy

The CFS opportunity Act

Fraud

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International in Scope
Financial Action Task Force (FATF) on Money Laundering
 Argentina  Japan
 Australia  Luxembourg USA
 Austria  Mexico PATRIOT Act Terrorism
 Belgium  Kingdom of the
 Brazil Netherlands
 Canada  New Zealand
 Denmark  Norway Money Laundering
 European  Portugal FATF OFAC
Commission  Russian
 Finland Federation
 France  Singapore Bank
 Germany  South Africa Secrecy
 Greece  Spain Act
 Gulf Co-operation  Sweden The Egmont Group of
Council  Switzerland Financial Intelligence Units
 Hong Kong, China  Turkey
 Iceland  United Kingdom Fraud
 Ireland  United States
 Italy

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BSI’s Financial Intelligence Solutions
Integrated & End-to-End

Organization
Auditing
And Account Transaction Account
And
Process Opening Processing Closed
Reporting
Design

Pringle (Policies)

Training

Information Resources / CHQ

CIP Checklist

Risk Assessment
Matrix

ID Flag

International Data Source

AML Software

Case Management

27 April 2004 CFS Division Day – New York 9

BSI’s Financial Intelligence
Solutions Overview

Identity Verification
Fraud Record
File Retention

Core
Processor Global hi-risk check
AML
Software Case
Management

OFAC
System 1 System 2 System 3

Risk Management
User Management
FINCen
Billing
Automated Routing

Professional Services
Other (TBD)
Resources and Tools
BANK BSI Vendors

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World-Check
 A database containing the names of high-risk individuals and businesses
(senior political figures, terrorists, money-launderers, etc.)

 Covers the United States and 230 other countries

 Over 400 institutions (from banks to government) use W-C to screen their
customers for risk.

 Concise profile provides information aliases, alternative name spellings,

relationships and synopsis explaining why individual or business has
been identified as high-risk (original sources provided as Includes links
to source information for verification purposes

 Virtually every sanction list, plus 100,000+ other sources, including

law enforcement, regulatory actions, watchdog groups and
international media

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Key Benefits

 Improves efficiency of business account verification

 Addresses fraud losses

 Ensures consistency between business units

 Multiple delivery options

 Easy to use

 Resources available to facilitate integration

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 Compliance Tools for the
Securities Market

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Source of Risk in Securities
Compliance:

AML

Fraud

PATRIOT Act

Trade Irregularities

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 SEC Rules Require Monitoring of
Trades for:
Loss in Equity  Discretionary Activity

Turnover Ratios  Mutual Fund Switching

Cost-Equity Ratios  Approval Levels

Transaction Suitability  Mutual Fund Breakpoints

Portfolio Suitability  Broker Risk Profiles

Front-running  Spoofing

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CCH Wall Street Compliance
EYE
An integrated surveillance tool to
monitor trade and trade-related data
for compliance with all applicable
regulatory requirements

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CCH Wall Street Trade Surveillance and Case
Management Growth Opportunity
Compliance Officer CCH Wall Street 3rd Party Data

Inefficient Reactive,
Use of Time Not Proactive WSP Email Regs
Other

Manual Inconsistent
Processes Audit Terms

Increasing OFAC
Workload

Compliance EYE
Mutual Fund
a/c info Suitability Other firm Data
criteria data

OMS Clearing
Firms

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