Exploring the relationship between AML & Fraud Hosted by: Jesse Hopkins, CeFPro Presenters: Kevin Lindsay, Sumitomo Mitsui Banking Corporation Europe Larry Potter, Starling Bank
Meet the Webinar presenters… Kevin Lindsay Larry Potter Deputy Head of Financial Head of Compliance Crime Group and MLRO SMBC Europe Starling Bank
Relationship between AML & Fraud Larry Potter, Chief Risk Officer
Until now people haven’t experienced the same technical innovation from banks that they have benefited from everywhere else in their lives
Starling Bank • Banking/Tech start-up • Mobile-only • 100% cloud-based, • Apple/Android/FitBitPay • Spending insights • Savings goals • Open APIs
Building an AML & Fraud function - day 1 • Started from scratch • Combined AML/Fraud resource • Single transaction monitoring rule set ➢ Delivered daily ➢ Investigated manually • Limited actual experience data
Building an AML & Fraud function Data Events Analysis Reporting Control Typologies
Building an AML & Fraud function - Now • Specialist Fraud/AML resource • Separate AML & Fraud transaction monitoring ➢ Real-time and daily reports ➢ Mix of autonomous action and manual investigation • Data experience leading to typologies
Key challenges • Keeping pace with customer volumes • Strong connection between Fraud and AML • Adapting to new features and technologies • Keeping up with new types of fraud • New regulation - including the impact of PSD2 • Changing relationship between customers and their banks
AML & Fraud Kevin Lindsay Deputy Head of Financial Crime Group www.smbcgroup.com Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority
Background SMBCE was established in March 2003 and is a wholly- SMBC is a top-tier Japanese bank, which maintains relationships owned subsidiary of SMBC. The bank focuses on with over 103,000 companies in Japan. corporate activities carrying out the majority of its The history of the Sumitomo and Mitsui companies date back activities in Europe, the Middle East and Africa. more than four centuries, and both were founded as banks in the nineteenth century. SMBC’s predecessor banks, Mitsui Bank was founded in July 1876 Ownership inTokyo, and Sumitomo Bank in 1895 in Osaka. SMBC 100% (UK incorporated subsidiary of SMBC) SMBC was established in 2001 following the merger of the two Head office leading banks: Sakura, formerly Mitsui Taiyo Kobe; and Sumitomo. 99 Queen Victoria Street, London, EC4V 4EH, United Kingdom Head office Number of employees 1-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo, Japan 990 Number of employees Network 29,283 6 branches: Paris, Milan, Amsterdam, Dublin, Prague and Madrid Network 440 domestic branches (Japan) (excluding sub-branches and agencies) 18 overseas branches (excluding sub-branches and representative offices) 2 www.smbcgroup.com
AML & Fraud All Financial Institutions are committed to preventing financial crime and to consistently applying the letter and spirit of applicable laws to prevent fraud all areas of their operations. Fraud is an act of deception intended for personal gain or to cause a loss to another party. Fraud can be both financial and non financial and does not need to have a cash element to it. Fraud can cause significant financial loss and can have a detrimental effect on the reputation of an organisation. Fraud can be split into two types: Internal Fraud Controls Internal fraud, or fraud committed by Employees of the Bank, The key to managing internal fraud, is to embed appropriate can have a serious impact on both financial standing and controls into day to day activities to limit the potential of reputation. The types of internal fraud include, but are not fraud taking place. However, the bigger the Bank the greater limited to: the risk of internal fraud taking place: Falsifying expense claims; Tone from the top; Ø Ø Concealment of adverse information; Training; Ø Ø Alteration or forging of documents and/or instructions; Appropriate escalation / whistleblowing; Ø Ø Misuse of confidential information (including insider 4-eye process for key roles / activities; and Ø Ø trading); Appropriate monitoring of key tasks. Ø Relationships with third parties that are not open and Ø transparent; Theft (of cash, assets or information); and Ø Tax evasion and facilitation of tax evasion. Ø 3 www.smbcgroup.com
AML & Fraud External Fraud Controls External fraud is unauthorised activity by a Third Party from The key to managing internal fraud, is to embed appropriate outside of the Bank. Without effective systems and controls, controls into day to day activities to limit the potential of the Bank can be unknowingly used as a conduit for fraud taking place. However, the bigger the Bank the greater fraudulent activity and/or become a victim. the risk of internal fraud taking place: Strong due diligence, understand the activities of the Ø Examples of external fraud include, but are not limited to: customer, their normal transactions, activities and their Fraudulent or misrepresented documents are supplied customers; Ø by a Customer or Third Party; Understanding the fraud risk of the products made Ø Online systems are compromised by hacking, phishing or available by the Bank; Ø malware; Detailed internal risk assessments; Ø Abuse of Bank products or property by Customer or Allocating our resources to the areas of highest risk; Ø Ø Third Party; Horizon scanning of current threats; Ø Customer is impersonated by a Third Party to access Education and training of staff; and Ø Ø funds or information; Educating customers on fraud trends and how to protect Ø Impersonation of the Bank to dupe Customers or Third themselves. Ø Parties; Customer is targeted by fraudsters and instructs the Ø Bank to pay away funds; and Tax evasion and facilitation of tax evasion. Ø 4 www.smbcgroup.com
Thank you for attending You may also be interested in… Assessing the interaction and convergence between fraud and financial crime for effective monitoring, detection and prevention. Hear insight from senior fraud experts from leading FI’s such as: European Banking Authority, Lloyds Banking Group, UBS, HSBC and more. View full speaker line-up and agenda at www.cefpro.com/ffce
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