WATCH WEBINAR: https://www.caseware.com/alessa/webinars/strategies-to-enhance-your-screening-and-transaction-monitoring-processes/ Transaction monitoring and sanctions screening are crucial processes for both traditional and non-traditional financial institutions. With changing regulations coupled with increased regulatory scrutiny being the new normal, having a streamlined and flexible approach has become more important for AML Compliance teams looking to improve cost savings and resource allocation. In this webinar, our presenters from ICICI Bank and Transfast join CaseWare RCM to discuss • How to assess and factor risk criteria such as regulatory, country, customer and services risks; • Data elements to consider when determining lists selection and customer and/or transactions attributes • Policies and procedures to determine monitoring and screening type and frequency as well as management of high risk situations • Strategies for increasing detection of real reportable activities and reducing false positives and time for investigations About Alessa, a CaseWare RCM product: Alessa is a financial crime detection, prevention and management solution offered by CaseWare RCM Inc. With deployments in more than 20 countries in banking, insurance, FinTech, gaming, manufacturing, retail and more, Alessa is the only platform organizations need to identify high-risk activities and stay ahead of compliance. To learn more about how Alessa can help your organization ensure compliance, detect complex fraud schemes, and prevent waste, abuse and misuse, visit us at caseware.com/alessa. Connect with us online: Visit the Alessa WEBSITE: https://www.caseware.com/alessa/ Follow Alessa on LINKEDIN: https://www.linkedin.com/caseware-alessa Follow Alessa on TWITTER: https://twitter.com/casewarealessa SUBSCRIBE to Alessa on YouTube: http://tiny.cc/Alessa

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Strategies to Enhance your Screening
and Transaction Monitoring
Processes
Sponsored by

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About Presenters
Joel Freckleton, CAMS
Regional Sales Manager,
CaseWare RCM
Eric Hansen,
Senior Risk Specialist,
CaseWare RCM
Daniel Buckingham,
Director of Compliance Strategy,
Governance and Technology,
Transfast
Mandar Vaidya,
Assistant Vice President, Compliance,
ICICI Bank Canada

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Housekeeping
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Agenda
4
1. Understanding risk
2. Translating risks into transaction monitoring
realities
3. Tuning capabilities

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Risk-Based Approach
Challenge:
Theoretically sound premise, but practical realities make this difficult to achieve and
reliably demonstrate
Intent:
More efficient use of resources to mitigate the ML/TF risks identified. It enables a firm to
focus their resources and take enhanced measures in situations where the risks are
higher, apply simplified measures where the risks are lower and exempt low risk activities.

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FATF: Risk-Based Approach
“Competent authorities and financial institutions, are expected to
identify, assess and understand the ML/TF risks to which they are
exposed and take AML/CFT measures commensurate to those
risks in order to mitigate them effectively.”
The Financial Action Task Force (FATF) Guidance for a Risk-based approach - 2014

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Understanding Risk: Monitoring & Detection Perspectives
Challenge:
Identifying the balance:
• Coverage vs. targeted approaches to risk identification and mitigation.
• Manual vs. automated mechanisms
• Interim vs. Strategic solutions
Intent:
• More comprehensive view of risks, to most importantly understand the realities of risk
(likelihood, impact and repercussions) to make an informed decision around your risk
focus lenses.
• Enables early insight into challenges and/or realities that may impact and even limit the
ability to efficiently and effectively monitor and detect risk.

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Understanding Risk: Monitoring & Detection Perspectives
• Enterprise & Localized assessments are critical
• Inherent Risk
• Customers, Product/Services, Transactions Type, Geography, etc.
• Risk mapping e.g. to specific regulations/country typologies (manage risk nuances)
• Perceived vs. Real
• Likelihood, impact and repercussions
• Upstream and Downstream realities
• Transaction flows and data capture rules
• Product and service parameters (limits, restrictions etc.)
• KYC processes
• Knowledgeable & skilled staff
• Manual vs. automated

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POLL 1:
How does your Organization conduct risk
assessments?
1. Enterprise (holistically)
2. By department
3. Regulator driven
4. Other

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From Targeted Risks to Monitoring/Detection Realities
Challenge:
• Data quality and availability to support true targeting of risk.
Intent:
• To understand the type and combination of monitoring controls needed and how
effective these controls will be, based upon the data availability, completeness and
accuracy.

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From Targeted Risks to Monitoring/Detection Realities
• Risk Factors Elements
• What are the specific attributes that when present (combined) would identify the risk?
• When (risk tolerance) does the risk become real?
• What areas within the organization (customers, products, services etc.) are affected by this
risk, and are they all equal (risk tolerance)?
• Map data element to the constituent parts
• Where is the data? Is it electronic or physical? Can the acquisition be automated?
• Data completeness and accuracy
• Define monitoring & detection capabilities
• Is there sufficient electronic, systematic data to support automation?
• Does the data require manual acquisition and transformation before it can be used?

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Tuning Monitoring & Detection Capabilities
Challenge:
• To not build in such a bias that risks (even if lower) are not being monitored and
detected.
• Finding the balance between targeted and coverage risk mitigation and human
resources to manage.
Intent:
• To build a more effective approach to monitoring and detection of risk that is
proportional to the risks of the firm. The efforts are proportionally higher where the
risks are higher.

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Tuning Monitoring & Detection Capabilities
• Tuning
• Using a combination of system parameters and data for optimization
o Targeting of specific risks
o Reduction of unproductive detection
o Timeliness of detection
o Coverage of detection (spectrum of risk monitoring)
• Risk Based Bias
• Monitoring and detection skewed towards risk
o More specific detection approaches
o Higher propensity to alert
• More efforts are made using the compliments of parts to monitor and detect.

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POLL 2:
What type of tuning function do you currently have
in place?
1. Maintained through the compliance department
2. Outsourced
3. Managed by IT
4. Other

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Strategies to optimize Transaction Monitoring processes
• Use a risk-based approach to enable a comprehensive view of risks, to better understand the
realities of risk (likelihood, impact and repercussions)
• Understand the type, frequency and combination of monitoring controls needed and how
effective these controls will be, based upon the data availability, completeness and accuracy.
• Ensure approach balances between targeted and coverage risk mitigation
• Utilize periodic tuning for sustainability
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Summary

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Agenda
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1. Effective watch lists screening
2. Enabling risk scoring
3. Effective communication

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Sanctions Fines

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Customer Risk - Onboarding
• Customer characteristics (name, address, date of birth, profession etc.)
• Corporate entities characteristics (industry, revenue, no of employees, geographies, etc.)
• Anticipated utilization and activity of account
• Presence on any sanctions or watch lists including politically-exposed persons (PEP) lists
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Customer Risk – Onboarding

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Triggers for Screening
• Daily Screening against list deltas
• Screening at time of transaction
(against A and B parties)
• Ongoing monitoring of high-risk
clients.
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Customer Risk – Ongoing Risk Score

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• Is part of effective financial crime compliance program
• Includes
• Watchlist screening
• Sanctions screening, and
• Screening for identifying PEPs, HIOs, and family members
• Screening is typically done at time of
• Establishing business relationship
• Processing of transactions
• Screening systems should find right balance between meeting regulatory expectation and
customer experience.
• In summary, should be effective and efficient
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Screening

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POLL 3:
How would you describe the state of your current
screening program?
1. Very good - other FIs could learn from us!
2. Adequate - at least it keeps the regulators happy
3. Needs improvement - could probably use some fine-tuning
4. Under construction - we are working on it!

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• It is important to design and develop a robust screening environment
• Each FI should assess its own risks
• Taking a Risk-Based Approach by considering parameters such as
• Product offering
• Customer base
• Geographic risk
• For example a retail credit product where real time approvals are required – the inherent
sanctions risk is low where customers are local customers with credit history, value of
transaction is low then using an automated system may be considered
• For Trade Finance customers, the inherent sanctions risk is high so enhanced due
diligence is required, for such products a mix of automated – manual processes may be
required
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How to Meet the Challenge

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• Screening environment is most often a complex set of processes
• Customer data maybe from multiple systems
• Screening lists from a reliable service provider
• Requires a good matching algorithm, and
• Flexibility to make quick changes
• FIs should have a strong governance over the screening process
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Good Screening Environment

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• Use the updated version of lists
• Use reliable sources
• Assess the accuracy of the list
• Look at geographic scope of list
application
• Be aware of common prefixes,
secondary names, suffixes
• Names in non-Latin characters
• Duplicate values
• 50 percent rule for entity ownership
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Best Practices for a Good Screening Environment

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• Not for Profit Organizations (NPO)
• Designated Non-Financial Businesses and Professions
• Shell Corporations
• Cash Intensive Businesses
• Pre-paid Card Issuers
• Marijuana Related Businesses
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Screening High-Risk Professions and Businesses

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• Periodic Quality Assurance checks are required
• Independent team within Compliance to do the checks
• Check for alert generation process – completeness and accuracy
• Flow of data into the screening system – data integrity
• Check the number of false positives generated – metrics and reporting
• Are all types of transactions integrated with the screening system
• Is there a need for recalibration?
• Are there misconfigured watch lists?
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Recalibration of Screening Environment

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Use Case – ICICI Bank of Canada
• Name Screening Process
• Risk-Based Approach
• In-house name screening matching algorithm using fuzzy logic, phonetic algorithm,
deletes “noise”
• Common global lists and geography specific lists ( where clients do most of the
transactions)
• Emphasis on regular trainings to AMLO within business functions
• Use of robotics /automation for clearing certain types of alerts
• Quarterly QA testing

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Strategies to enhance screening processes
• Use a Risk-Based Approach
• Design an effective screening environment
• Use new technologies, and
• Periodically re-calibrate the eco-system
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Summary

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Questions?

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Strategies to Enhance your Screening
and Transaction Monitoring
Processes
Sponsored by