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Managing Sanctions Risks in Payments Efficiently through Kyriba’s Fraud and Compliance Module




2020 Speakers

Tom LenahanAssistant VP Corporate Treasury MetLife

Vincent GaudelCompliance Expert Accuity

Camille MeunierProduct Manager Fraud, Compliance & Data Kyriba

Antoine UbaghsSenior Channel Manager, Accuity




Introduction

• Founded in 1836• Official Registrar of ABA Routing

Information since 1911• Part of RELX Plc.• Used by 90 percent of the world’s

largest banks

• Founded in 1868• Largest global providers of insurance,

annuities and employee benefit programs• Over 90M customers in 40+ countries• $70B in revenues for 2019




Agenda1. Landscape of Sanctions Challenges: Trends and figures

2. Compliance failures hurt: Takeaways from OFAC enforcement actions

3. Sanctions Compliance: Best Practices for a robust framework

4. Seamless sanctions compliance through Kyriba Fraud & Compliance Module




Landscape of Sanctions challenges: Trends & figures




1. Sanctions compliance challenges#1 Challenge: Sanctions are used for various purposes and against a growing number of entities

212

241

265

404

576

578

692

1652

1679

2376

0 500 1000 1500 2000 2500

Iraq

Venezuela

Human Rights & Corruption

North Korea

WMD Proliferation

Syria

Ukraine / Russia

Iran

Terrorism

Narcotics

US’ Top 10 Sanctions programs

OFAC list grew 40% since 2014: more than 8000 entities are sanctioned




1. Sanctions compliance challenges#2 Challenge: Sanctions measures become increasingly complex

Embargo

Asset freezes

Trade sanctions

Sectoral sanctions

Blockage applied to a full geography

Targeted entities are blocked

Restrictions on goods & services for full geographies

Restrictions apply to specific activities with specific entities

*

**

***

****

Stre

ngth

of m

easu

re

Difficulty to implem

ent




1. Sanctions compliance challenges#3 Challenge: Sanctions lists change constantly




Compliance failures hurt: Takeaways from OFAC enforcement actions




2. Compliance failures hurt: OFAC Enforcement#1 Takeaway: 2019 was a record year for OFAC, all industries are in OFAC’s radar

8

43

2

2111

11 1 1

Bank & Finance

Industrial machinery and services

Travel services

Insurance

Oilfield equipment & services

Aircraft

Chemicals

Construction

Cosmetics

Shipping

Software

GAFAM

Number of cases per sector 2019Total= 26 cases for $1.29 bn

A cosmetics company was fined because one of its suppliers sourced items from North Korea

A software company was fined for unwilfully providing financing to a Russian entity sanctioned under sectoral sanctions programs.

Apple had a glitch in their screening tool that failed to match “SIS doo” with “SIS DOO”.

“Only” 31% of actions concerned banks, but these are the largest, by far. These 8 actions against banks represent 99% of the fines.




2. Compliance failures hurt: OFAC Enforcement#2 Takeaway: Fines hurt, but there is more

• Designation for sanctions: in 2019, OFAC listed a breaching company’s executive as “Foreign Sanctions Evader”

• Prison sentences: Several criminal cases where individuals are jailed for breaching sanctions

• Remediation & regulatory monitoring: enforcement actions may include costly commitments to enhance compliance resources, submit regular reports to regulators…

• Reputational impacts: being fined by OFAC gets a firm recorded in the “Negative News” / “Adverse Media” watchlists.




2. Compliance failures hurt: OFAC EnforcementFinal Takeaway: Learn what counts… or how OFAC assesses a Penalty

OFAC starts by assessing the scope of violations: number of violations, amounts, duration

OFAC then uses 2 Factors to determine the “Base Penalty”:

Egregiousness

Self-

Disc

losu

re

YesNo

Yes

No

$ 10k

$ 5k

$ 250k$ 10k

$ 125k

$ 100k

$ 50k

$ 250k$ 100k

$ 125k

$ 1m

$ 125k

$ 2m$ 250k

$ 1m

• Egregiousness • Self-disclosure

Once the Base Penalty is established, the actual Penalty is assessed through several General factors:

Statutory max applied: $250k/transaction or twice

the transaction amount

A Schedule based on the transaction’s amount

applies

50% Statutory maximum applied:

$125k per violation

50% of the Applicable schedule

Examples:

Amount of Transaction in Breach:

• Aggravating factors: o Willfulness, o Harm to sanctions program, o Firm’s sophistication…

• Mitigating factors:o OFAC history,o Collaboration,o Compliance program…

Statutory maximum applied. The largest of:

• $250k/ transaction or• twice the transaction

amount

A Schedule based on the transaction’s amount

applies




Sanctions Compliance: Best Practices for a robust compliance framework




3. Sanctions compliance requirementsBest Practice #1: Design a formal sanctions compliance framework

• Critical step to design sound controls

• Methodology to assess sanctions risks must be comprehensive

• Countries of operations

• Counterparties

• Types of products or services

• Must be kept up-to-date

• Policies clarify the overall objectives

• Procedures implement controls

• Procedures are critical for mitigating:• Operational risks: stable process

delivery, reduces risk of errors or fraud.

• Regulatory risks: compliance controls embedded in operating procedures.

• A set of records must be kept to demonstrate effective controls

• For sanctions compliance, records may be required to prove:

• adequate due diligences

• informed decisions on alerts

• sound testing of screening controls

Risk Assessment Policies & Procedures Records




Best Practice #2: Define roles and actions to foster a culture of compliance

Senior Management

Compliance Function General Staff

• Oversight over the sanctions compliance program

• Signs-off on policies, communicates throughout the organization

• Ensures adequate resources are granted for sanctions compliance

• Designs controls to mitigate risks.

• Acts as a second line of control to ensure controls are effective

• Provides expert advice on sanctions issues, monitors risk remediation

• Acts as the first line of control

• Makes first level decisions on alerts (clearing false positives)

• Escalates potential true alerts

3. Sanctions compliance requirements




Best Practice #3: Get equipped to comply efficiently

Tools Data People

• Screening technology must be fit for purpose:

• Capabilities to detect partial matches

• Capabilities to handle different linguistics

• Tuning options to adjust detection

• Data quality is key to generate productive alerts:

• Screened data must be accurate, complete and structured

• Watchlist data must be current: regulatory updates need to be implemented without delay.

• Different skillset required to run screening controls:

• Information security for architecture, security and resilience

• Operations for ongoing controls and testing

• Compliance for designing rules & thresholds, providing analysis

3. Sanctions compliance requirements




Seamless Sanctions Compliance Through Kyriba Fraud and Compliance Module




Gain control over your payments, save time & money thanks to the Fraud & Compliance module

Sanction List ScreeningFraud Detection

Detect supicious payments that may be fraudulent thanks to:

Your customizable rules

Our Machine Learning model, available for you, out-of-the-box

Centralized cockpit to detect potential fraud and compliance breach in real time, before it happens and analyze them seamlessly.

Detect payments not compliant with sanction lists:

Fully integrated solution, sanction lists automatically updated daily

Proactive check to avoid frozen funds, fines, reputation damage

Fraud & Compliance




Default package: • OFAC• United Nations• European Union

Real time detection to gain control over your payments

Your white lists

?

Payment

Payments integration from ERPs

Workflow until the payment file generation

Official sanction lists automatically updated daily

In charge of analysis

Fraud & Compliance

Fraud detection

Sanction List ScreeningBank file approval

?

?

• Your customized rules• Our Machine

Learning capabilities




Q&AKey Takeaways:

Reg. expectation & enforcement is growing deeper and deeper.

Sanctions challenges are growing more complex.

Reg Technology is essential both for effective and efficient

compliance.

Kyriba provides for seamless integration of Fircosoft, the best-of-breed filtering technology used by the world’s largest banks

-> Visit our booth for a demo!

Real time Flexibility Traceability



• Fourth level• Fifth levelThank you




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