Risk Management Presentation July 23 2012

7/28/2019 Risk Management Presentation July 23 2012

1/77

P a g e | 1

International Association of Risk and ComplianceProfessionals (IARCP)

1200 G Street NW Suite 800 Washington, DC 20005-6705 USATel: 202-449-9750www.risk-compliance-association.com

Top 10 risk and compliance management related news storiesand world events that (for better or for worse) shaped the week's

agenda, and what is next

George LekatisPresident of the IARCP

Dear Member,

Who said that?

The hundreds of rules and regulations that Dodd-Frank demands of theSEC and other financial regulators indicate just how farthe governmenthas reached into the private sector and just how heavy the governmentshand will be.

Or, stated differently, the regulatory change demonstrates the degree towhich government decision making, effectuated as it is through more

regulation, will displace and distort private sector decision making.

To put it more directly, I have been and remain troubled that theDodd-Frank regulatory regime goes too far.

Who said that?Commissioner Troy A. Paredes, from the U.S. Securitiesand Exchange Commission, Washington, D.C.

Commissioner Troy A. Paredes continues:

The key question, therefore, is not whether we will or should have

regulation.

The answer to that question is straightforward: we will and we should.

The real question is, How much?

International Association of Risk and Compliance Professionals (IARCP)www.risk-compliance-association.com
http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/


2/77

P a g e | 2

When it comes to the question ofHow much?, I am concerned that thepresent wave of regulation will prove to be excessive, unduly burdeningand restricting our financial system and suppressing private sectorinnovation, entrepreneurism, and competition at the expense of ourcountrys economic growth and global competitiveness.

My concern that we are overregulating is accentuated when instead ofevaluating each rule and regulation one-by-one, the totality of theregulation that the private sector must bear is added up.

As regulatory mandates mount, I worry that the cumulative impact of theaggregation of rules and regulations will make it more difficult forcompanies to raise capital and to manage their risks effectively; will makeit more costly for individuals to borrow when they need to; will stifle thecutting-edge innovation that we depend on to drive our economy forward;

will leave investors with fewer valuable opportunitiesfor building theirwealth; and will undercut job creation.

Read more at N umber 5.

Welcome to the Top 10 list.

http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/


3/77

P a g e | 3

FINMA publishes circulars onimplementing Basel II I and TBTF

requirements

FINMA will put a new circular oneligible capital into effect starting 1January 2013 as well as revised circulars on capital planning, credit andmarket risk, disclosure and risk diversification.

Remarks by Under SecretaryLael Brainard on China at theCenter for American Progress

The choices China makes as it navigates its next phase of developmentwill matter greatly for the kind of international playing field ourcompanies, workers, farmers, and ranchers will face.

FI proposes higher requirements forthe banks liquidity buffers

Sweden shall act ahead of the EU and introducequantitativerequirement s regardin g the ban ks liqu idit y bu ffers .

The aim is to ensure that large banks and credit institutions holdsufficient liquid assets to be able to manage short periods without accessto market funding.



4/77

P a g e | 4

Building deeper economic union: whatto do and what to avoid

Speech by Jrg Asmussen, Member ofthe Executive Board of the ECB,Policy Briefing at the European PolicyCentre, Brussels, 17 July 2012

Does the Dodd-Frank regulatory regime gotoo far?

Remarks at Society of Corporate Secretaries

& Governance Professionals, 66th NationalConference on The Shape of Things toComeby Commissioner Troy A. Paredes,U.S. Securities and Exchange Commission,Washington, D.C.

Advise the Advisor: Streamlining,Improving, and Simplifying Rules andRegulations

Islamic Finance: Not such an alien worldat all, from Jrg Rieger, BaFin

Could the financial crisis have been prevented if the financial world hadfollowed the rules of Islamicor Sharia law?



5/77

P a g e | 5

Opening Statement of Chairwoman DebbieStabenow (D-Mich)

Dodd-Frank Wall Street Reform andConsumer Protection Act: 2 Years LaterJuly 17, 2012

EIOPA hosts a meeting of the EU - US insurancedialogue

The European Insurance and OccupationalPensions Authority (EIOPA) hosted on 11 July aSteering Committee Meeting of the EU/ USinsurance dialogue project.

Towards a Financially Literate Nation

Speech by Lee Chuan Teck, Chairman,

Financial Education Steering Committeeand Assistant Managing Director, Monetary Authority of Singapore at

the launch of the MoneySENSESingapore Polytechnic Institute forFinancial Literacy



6/77

P a g e | 6

NUMBER 1

FINMA publishes circulars on implementing Basel I I I andTBTF requirements

FINMA will put a new circular on eligible capital into effect starting 1

January 2013 as well as revised circulars on capital planning, credit andmarket risk, disclosure and risk diversification.

In doing so, the supervisory authority presents its implementingprovisions on the recently revised Capital Adequacy Ordinance (CAO)regarding the implementation of the Basel I I I requirements and the "toobig to fail" (TBTF) legislation.

Following the financial market crisis in 2008/ 2009, the new Basel II Iregulations were drawn up under the leadership of the Group ofGovernors and Heads of Supervision (GHOS) and the Basel Committeeon Banking Supervision (BCBS).

In line with these regulations, banks must hold more and qualitativelybetter capital.

At the same time, the TBTF regime was drafted which sets out additionalregulatory requirements for systemically important institutions.

In order to implement the Basel I I I requirements and the new TBTFregime in Switzerland, FINMA is publishing today updated circulars asimplementing provisions for the revised CAO which was adopted by theFederal Council in June 2012.



7/77

P a g e | 7

The new circular and the aforementioned amended circulars will enterinto force along with the CAO on 1 January 2013.

The implementing provisions set out in the FINMA circulars do not,nevertheless, put all the elements of the Basel II I framework into practice.

Still to be implemented are the detailed disclosure obligations for eligiblecapital decided recently by the Basel Committee, and the precise handlingof credit risk exposure to central counterparties which has yet to bepublished.

FINMA intends publishing its implementing provisions on these mattersas soon as possible so that those Basel II I elements can also come intoforce as of 1 January 2013.

Minimum changes compared with the consultation drafts

Integration of the Basel II I international standards into the Swissregulatory framework was conducted by an existing national workinggroup whose representatives are from official bodies and the industry. Therevised drafts of the circulars were therefore not unexpected for manymarket participants and have been broadly supported.

Any adjustments have mostly involved editorial changes. Most reaction

was triggered by the new circular on eligible capital (F INMA-RS 13/ 01).As this circular has absorbed the key content of FINMA-Circ. 08/34"Core CapitalBanks", the latter has become redundant and will berepealed as of 1 January 2013.

Changes to other circulars

The newly defined capital categories in the CAO have resulted inamending the quality of capital specified in FINMA Circ. 11/2 "Capitalbuffer and capital planningbanks".

The objections brought forward in the consultation claiming that theadjustments involved go beyond the ordinance in terms of tighteningcapital requirements were partly in F INMA's interests. Changes toFINMA Circ. 11/2 will also enter into force on 1 January 2013.



8/77

P a g e | 8

Moreover, FINMA is repealing FINMA Circular 08/ 9 "Supervision oflarge banks" as of 31 July 2012. I t will not be replaced, since establishedsupervisory practice and other regulations adequately cover its content.

Its repeal does not in any way change the current supervisory practicewith respect to the two large banks: no additional obligations will ariseand those that exist will neither be amended nor abolished.



9/77

P a g e | 9

NUMBER 2

Remarks by Under Secretary Lael Brainard on China at theCenter for American Progress (CAP)

WASHINGTON - Our countrys economic future lies primarily in ourown hands.

But the choices China makes as it navigates its next phase ofdevelopment will matter greatly for the kind of international playing fieldour companies, workers, farmers, and ranchers will face.

That is why the President has worked hard from day one to make oureconomic relationship with China more balanced so that it yields greaterbenefits for American workers and exporters and China no longer playsby a different set of rules.

At every juncture, the President and his economic team have pressedChina to abide by international norms, especially given its outsized role inthe international trading system.

We have highlighted the costs of not adopting these norms, and we havemoved forward with forging higher standards with like-minded countries.

The President has demanded changes where our core economic interestsare at stake, and we have used all available mechanisms effectively andaggressively to defend themincluding through the World TradeOrganization (WTO) and the newly-created trade enforcement center thatinvestigates unfair trading practices.

We have sought to work with the grain of the reform agenda many inChina are advocating.



10/77

P a g e | 10

We have highlighted the importance of rebalancing growth and levelingthe playing field so that China avoids the middle-income trap andnavigates its demographic transition.

And we have done so without undue drama by cultivating greater clarityand predictability in our bilateral engagement.

We have worked hard to find common ground, recognizing that the firstand second largest economies share an overwhelming interest in buildinga more robust global economy.

Today, our approach is yielding measurable gains.

Exports to China have grown by over 50 percent since 2009in line with

the Presidentsstrategy of doubling exports in five years.

For the first time in decades, consulting companies are highlighting theattraction for global companies of bringing jobs to the United States, orinsourcing their operationsciting heightened competitivenessrelative to other markets.

And employment in U.S. manufacturing has increased month after month,adding more than 500,000 new jobs since 2010.

Let me briefly elaborate on these four aspects of our approach.First, Chinaseconomy is now too large for it to pick and choose which

rules it will follow without risking the integrity and legitimacy of theinternational system on which Chinasgrowth depends.

Chinas persistent exchange rate undervaluation in the years following itsadmission to the WTO is a vivid example of the impact Chinaspolicychoices have on the international system.

From the time China joined the WTO to 2006, its trade-weightedexchange rate depreciated by 15 percent, adjusting for inflation.

Of course, with Chinasproductivity growth outpacing that of its tradingpartners, we should have seen strong appreciation throughout the period.



11/77

P a g e | 11

This was not just our assessment; it was the International MonetaryFunds (IM F) as well.

Chinas current account surplus shot up from roughly 1 percent of GDP toover 10 percent by 2007.

To compensate for theRMBs growing undervaluation, Chinas tradingpartners either resisted appreciation of their own exchange rates, therebyamplifying the distortion, or bore an undue burden of adjustment.

The strains placed on the global economy sorely tested the legitimacy ofthe WTO and the IMF.

From day one, we have stressed that this approach is bad for China and

unacceptable to the United States.

With demand in many advanced economies expected to remain weak forsome time, and with a steep demographic cliff fast approaching, Chinafaces tough choices to sustain growth and avoid the middle-income trap.

The policy choices China makes will be important to Americaseconomicintereststo our exports, our workers, our businesses, and our farmers.

Only by moving from an economy dependent on external demand and

exports to one driven by domestic consumer demand; an economydependent on over-investment in resource-intensive industries to relianceon higher value activities; and an economy dependent on adoption andadaptation of foreign technology to one that nurtures innovation, canChina sustain its growth.

As it makes this transition, Chinasdomestic goals will be well served bythe same principles that we pursue in our trade and investment agenda.

China will be able to transition to higher value activities and developrobust innovation capacity only if it protects and enforces intellectualproperty rights, opens its government procurement market, eliminatespreferential treatment of state-owned enterprises (SOEs), and compels itsexporters to compete on the strength of their product offerings.



12/77

P a g e | 12

It will not work with below-market input prices, an undervalued exchangerate, and pervasive intellectual property violations.

Of course, as China makes this transition, it will have a growing interestin improving access to investment opportunities in Americas dynamicmarkets and to our highly innovative products and services.

We are willing to make progress on these issues, but our ability to do sowill depend on how much progress we see from China.

And we are seeing some progress. Alongside Chinasgrowth in wagesawelcome boost to household incomesexchange rate appreciation isstarting to make a difference for our exporters and our workers.

Chinas current account surplus has fallen by over 6 percentage points ofGDP, reflecting an 11 percent appreciation of the currency against thedollar in inflation-adjusted terms.

China has taken a number of steps in recent months to reform and openits financial markets, which are critical to leveling the playing field andmaking the transition to sustainable growth.

China has widened its exchange rate bands and reduced intervention inthe foreign exchange market. Chinascapital controls are being

cautiously dismantled.

Financial authorities are allowing greater market determination ofinterest rates.

Through the U.S.-China Strategic and Economic Dialogue (S&ED), wehave secured improved access for foreign financial services firms insecurities and casualty insurance, as well as a greater ability for them toexpand their offerings of financial products.

But this is not enough.

We will continue to press China to make more progress and providegreater transparency to meet itsG-20 commitment to enhance exchange



13/77

P a g e | 13

rate flexibility, avoid persistent exchange rate misalignment, and refrainfrom competitive devaluation.

We will continue to press China to address the rampant theft ofintellectual property, including trade secrets, to meet internationalstandards.

Following intense engagement at the highest levels, China reversed a setof policies that would have discriminated against foreign intellectualproperty.

In large part because of efforts by the Department of Commerce and theU.S. Trade Representative (USTR), China established a high-levelmechanism under the leadership of ChinasState Council to oversee

enforcement efforts, including efforts to discourage government use ofpirated software.

But far greater resolve will be needed if China is to re-join the ranks of themost innovative economiesincluding working together to stem thegrowing challenge of cyber-enabled intellectual property violations.

It is also important to address the privileges enjoyed by ChinasSOEs,which create an unfair advantage that hurts Chinasprivate enterprises noless than for U.S. competitors.

That is why it was significant when Chinese authorities committed in thisyearsS&ED to ensure that credit, taxation, and regulatory policies wouldapply on a non-discriminatory basis across enterprises of all types and toincrease the portion of profits ChinasSOEs must pay out in dividendscomparable to other publicly-listed companies.

During the years when Chinasexternal imbalances ballooned, the highprofits retained by ChinasSOEs were a major contributor to thoseimbalances.

Going forward, unlocking SOE savings will help level the playing fieldand provide resources to boost social spending.



14/77

P a g e | 14

Second, with China now big enough to have a systemic impact across arange of dimensions, China can no longer insist on one set of standardsfor the big players and another set of standards for itself.

In turn, we recognize that China must be at the table as global standardsare set.

So, for instance, it was critical for China to be at the table as the FinancialStability Board and the G-20 negotiated global standards for bank capital,orderly liquidation of financial institutions, and over-the-counterderivatives.

Along with the other emerging market members, China has taken on thesame set of responsibilities as advanced economies, which is essential as

its financial markets grow.

While export finance in the United States and other key export nationshave long been bound to a set of understandable international disciplines,Chinas exporters have derived benefit from a confusing and opaqueexport financing system.

Early this year, President Obama made clear we were prepared to matchunfair financing to ensure a level playing field for our exporters.

And since then, China has agreed to join negotiations on internationalrules where they will be included for the first timea critical step as weensure that our world class exporters are able to compete once again onthe strength of quality and price, with trade finance to support, notsupplant, market competition.

Chinas vast procurement market has also been outside the internationalsystem for too long, despite its repeated promises to join the WTOAgreement on Government Procurement (GPA).

But we are no longer idly sitting by.



15/77

P a g e | 15

The United States has been clear that access to much of our governmentprocurement would depend on commensurate access under the terms ofan accession agreement by China to the GPA.

We are pushing China to incorporate these elements and look forward toseeing a stronger offer before the end of this year.

It is critical that Chinasaccession to the GPA provide U.S. businesseswith improved access not just to its large central governmentprocurement market, but also to sub-central procurement that accountedfor an estimated 93 percent of total government procurement in 2010.

And through the Trans-Pacific Partnership (TPP) Agreement we aredesigning the standards that will constitute the new frontiers for 21st

century trade agreements in the key export markets of the Asia-Pacificregion.

With product cycles and competitive advantage being driven in markettime, international standards must continue to move forward.

It is thus vital that the TPP address the full scope of disciplines relevant toan open and fair trading system.

By working with like-minded countries, we are setting high standards,

with the open architecture of the TPP a pathway for additional countriesto raise their standards to commensurate levels.

Third, President Obama has demonstrated his determination to use thelegitimate enforcement tools we have available to ensure our tradingpartners play by the rules as a core part of our trade strategy.

That is why it was important to demonstrate early on thisAdministrationsdetermination to enforce the Section 421 China-specificsafeguard mechanism after eight years of disuse, during whichsafeguards were not imposed in a single one of the cases broughtsuccessfully by private industry.



16/77

P a g e | 16

That is why the President created a new Interagency Trade EnforcementCenter to coordinate enforcement and focus tirelessly on challengingunfair trade practices around the world.

That is also why USTR has pursued WTO challenges at twice theprevailing rate of prior administrations.

Earlier this month, USTR launched a WTO case against China forimposing unfair duties on more than $3 billion on 80 percent of U.S. autoexports.

USTR has strategically taken cases forward so that each case, such as thatof export restraints of certain raw materials, lays strong foundations thatcan be used to dismantle restraints in other key export areas, including

rare earths, which are key inputs in U.S. advanced manufacturingproducts like wind turbines and lithium ion batteries.

And earlier this week, we successfully challenged Chinasdiscriminatorylimitations against foreign electronic payment systems in the WTO.

Finally, it is essential that we place these efforts in the broader context ofsystematic efforts across the Administration to expand and strengthenchannels of communication with Chinese decision makers.

We have pursued our agenda with China in a way that createspredictability and clarity, pursuing areas of cooperation even as we pressto resolve problems.

The challenging external environment has necessitated closecollaboration with China to steer a more resilient global recovery.

We supported a greater role for China in key international economicgroups, recognizing that Chinese authorities have been pragmatic andactive in supporting growth in the face of recurring bouts of financialstress from Europe.



17/77

P a g e | 17

The Administrations engagement with China has been intensive andhighly prioritized since day one, from the White House and across alleconomic agencies.

We have maintained continuous interaction at all levels with the Chinesegovernment across the full range of economic issues through mechanismssuch as the Joint Commission on Commerce and Trade, the InnovationDialogue, and the Investment Forum, to mention a few.

Under the leadership of Secretary Geithner and Secretary Clinton, theU.S.-China Strategic and Economic Dialogue has strengthenedrelationships and mechanisms that have enabled us to pursue thesepriorities effectively at the highest levels.

China is critically important to us. Getting this relationship right isessential. We have made significant progress, but we know, just as youdo, that what matters is not just what we agree to on paper, but what reallyhappens on the ground.

Thatswhy we remain vigilant and focused, using all appropriate toolsand leverage to make a difference for our workers and our businesses.

Thank you.



18/77

P a g e | 18

Testimony By Fiscal Assistant Secretary Richard Gregg BeforeThe Senate Committee On Homeland Security AndGovernmental Affairs

WASHINGTON - Chairman Lieberman, Ranking Member Collins, andmembers of the Committee, thank you for inviting me to discuss theDepartment of the Treasury's initiatives to increase Federal financial datatransparency and accountability.

As the Federal government's financial manager, the Department of theTreasury is uniquely positioned to improve the transparency andaccountability of Federal financial transactions.

Each year Treasury processes billions of financial transactions on behalfof Federal agencies, including payments, revenue and debt collections,and intra-governmental transfers.

Treasury is committed to making sure that these transactions are carriedout with the highest standards of performance, accountability, andtransparency.

With these goals in mind, over the past several years Treasury haslaunched a number of initiatives to modernize its financial systems,

improve transparency, and streamline its transaction execution andreporting processes.

Transparency

In processing billions of financial transactions each year, Treasuryaccumulates extensive Federal financial data.

Treasury's goal is to ultimately provide this data to Federal agencies,Congress, and the public in a usable, easy-to-understand format.

For Federal payments, Treasury makes one billion payments each year,which represents approximately 85 percent of all government payments.

Historically, Treasury's goal has been to make sure every payment ismade accurately and on time.



19/77

P a g e | 19

However, more recently Treasury recognized that we are uniquelypositioned to make more payment information available to the public andto have that information available quickly and presented in a way that ismeaningful.

To achieve greater payment transparency, Treasury is developing arobust business intelligence and data analytics system as part of ourefforts to simplify and streamline the Federal payment process.

This new system, called the Payment Information Repository (PIR), willallow information from payment systems to be viewed and analyzed in asingle application that consolidates data from all Federal spending,including grants, contracts, loans, and agency expenses, therebyincreasing Federal payment transparency.

The PIR will capture and make available payment transaction data thatcan be linked to other government databases, such as USASpending.gov,to enable the public to follow a payment through the complete spendingcycle from appropriations to the disbursements of grants, contracts, andadministrative spending.

In support of this effort to streamline the payment process, we havealready developed the Payment Automation Manager (PAM), whichreplaces over 30 mainframe-based software applications previously usedby Treasury into a single, standardized application.

A key component of PAM is that it requires agencies to submit data in anewly defined Standard Payment Request format.

Beginning in August of this year, most agencies will be able to submitpayment data along with the related appropriation data in this standardelectronic format.

We will encourage agencies to adopt this new format as quickly aspossible, but no later than October 1, 2014 all agencies for which Treasury

disburses payments will be required to submit their payment data intoPAM using this standard format.

PAM will also be able to collect an assortment of other payment relateddata from agencies, including procurement information (for contracts),



20/77

P a g e | 20

grant or other program-related data, and data on recipients or payees,including payee location.

This standardized payment information from PAM will be provided to thePIR to capture richer data for analysis.

The flow of this information from PAM into the PIR is expected to beginin the third quarter of 2013:

By July 2013, information on payments issued by agencies, such asthe Social Security Administration, I nternal Revenue Service, andVeteran's Administration, will be stored in the PIR.

At the same time, agencies that issue their own payments, such asthe Department of Defense, will be able to submit standard files

directly into the PIR, and will be required to do so by October 1,2014.

By October 2014, international payments data and grant paymentdata will be stored in the PIR.

Also by October 2014, additional payment details from agenciesand post-payment related activity such as adjustments,cancellations, and returns will be stored in the PIR.

This information will allow taxpayers, agencies, and policymakers tomore easily track Federal spending.

Users will be able to chart which areas of the country the government isspending the most on contracts, grants, benefit payments, salarypayments, etc.

The reports and dashboards will allow the user to filter information byspecific attributes such as agency, state, or zip code where the payment isreceived, and type of payment.

Reports, queries, and analytics will incrementally be made available to thepublic.



21/77

P a g e | 21

We expect the standard reports to be available to the public by July 2013and structured queries to be available by December 2013.

More detailed queries and data analytics will be available in the followingmonths.

Personally Identifiable Information (PII) will be highly protected and notavailable to the public.

For example, the reports will show summary information on how muchthe government paid in Social Security benefits in a particular area, butwill not disclose an individual's name, address, or Social Security number.

Long-term vision for increasing transparency

Treasury's long-term vision is to provide a consolidated view of Federalfinancial management information on accounting, collections, debts, andpayments through a single repository that serves as the single point ofentry.

The Financial Information Repository (FIR) will allow users to integrateand correlate information to analyze and create composite views of dataacross our major business lines.

While the FIR is in its nascent state, it will ultimately address the growing

need to manage and centrally analyze and report on financial data relatedto Federal collections, payments, debts, and intra-governmentaltransactions that will be available to agencies, the Office of Managementand Budget (OMB), Congress, and the public.

Accountability

Following the President's June 2010 Memorandum directing agencies toimprove payment accuracy by using a "Do Not Pay List," Treasury, incollaboration with OMB, began developing the "Do Not Pay" (DNP)

Business Center.

The Business Center is comprised of the Do Not Pay Portal and DataAnalytics Service.



22/77

P a g e | 22

The Portal serves as a one-stop shop for agencies to check several keydatabases to verify eligibility before making a payment or award.

The databases that are currently available include the Death Master File,Excluded Parties List System, Debt Check Database, List of Excluded

Individuals/ Entities, and the Work Numbera commercially availabledata source with wage and employment information.

The Data Analytics Service provides customized analysis allowingagencies to compare program, payment, and vendor data with secondarysources to find patterns that might suggest fraud, waste, or abuse.

In April 2012, the DNP Business Center developed a partnership withTreasury's Financial Crimes Enforcement Network (FinCEN) in order tofurther enhance the analytic services provided to agencies.

This partnership will leverage FinCEN's investment in data analyticstools and their existing relationships with the law enforcementcommunity.

We are working to identify how and when the Data Analytics Service willtransfer potential fraud cases to FinCEN for further investigation.

DNP serves as a tool agencies can use to increase their own financialaccountability.

The services offered by DNP allow agencies to evaluate paymenteligibility based upon their internal business rules and the statutesgoverning their programs.

Treasury expects this financial accountability to increase even furtherwith the release of OMB guidance that directs executive agencies todevelop a plan for using a "centralized solution" to reduce improperpayments.

The DNP program is already assisting 27 programs in preventingimproper payments, and this number continues to grow as agenciesrespond to the guidance.



23/77

P a g e | 23

Data Standards

Data standardization, or the consistent use of common terms, formats,and definitions for key financial data elements, supports sound financialmanagement decision-making by improving the consistency and

accuracy of the government's financial data.

To achieve the transparency and accountability we all want, Treasury isworking to improve government-wide data definitions and standards.

Widely accepted and used data standards will foster the easy aggregationof financial data for external reporting and facilitate the movementtowards greater use of shared technologies and services throughoutgovernment, reducing the operational cost of government.

In addition to the payments modernization efforts I previously mentioned,Treasury has in the past worked closely with OMB to implement aCommon Government-wide Accounting Classification (CGAC) structure.

In the future, Treasury will use standardized data through ourmodernization efforts.

We will also build on our CGAC structure initiative by collaborating withOMB, GSA, and additional representatives from across the Federalfinancial community to form working groups dedicated to standardizing

key financial data elements.

These data elements will include agency and bureau identifiers, programidentifiers, project and activity codes, and individual award identifiers(e.g., contracts, grants, loans, etc.).

Conclusion

Treasury's transparency and accountability initiatives will change thelandscape of Federal financial management.

The Payment Information Repository will enable citizen participationand two-way communication between the public and governmentofficials for the purpose of deriving and maintaining public trust ingovernment financial information.



24/77

P a g e | 24

The DNP program will increase government accountability whilereducing, waste, fraud, and abuse.

We look forward to working with Congress to help ensure the success ofthese initiatives.

Thank you.



25/77

P a g e | 25

Testimony of Under Secretary for Terrorism and Illicit FinanceDavid Cohen before the Senate Committee on HomelandSecurity and Governmental Affairs Permanent Subcommittee onInvestigations on U.S. Vulnerabilities to Money Laundering,

Drugs, and Terroris

WASHINGTON - Chairman Levin, Ranking Member Coburn,distinguished members of the Subcommittee, thank you for inviting meto testify today.

I am pleased to have the opportunity to discuss the importance of theDepartment of the Treasurys efforts to identify and combat moneylaundering and terrorist financing vulnerabilities in the U.S. bankingsector.

I would also like to commend this Subcommittee for the leadership it hasdemonstrated historically and again today by focusing much-neededattention on these critically important issues.

At the outset, it is important to recognize that the United States maintainsone of the strongest and most effective anti-money laundering andcounter-terrorist financing (AML/CFT) regimes in the world.

But the scale, efficiency and sophistication of the United States financialsystemparticularly its banking sectormake it a prime target for thosewho seek to conceal and move illicit money.

This involves not just money launderers, of course, but terrorists,proliferators, drug lords and organized crime figures, who must, at somepoint, rely on the financial system to move or launder the illicit fundssupporting or derived from their operations.

Recent enforcement actions against financial institutions in the United

States are a powerful reminder to us that challenges remain.

To meet these challenges, we closely monitor evolving threats and workto adapt and strengthen our anti-money laundering and counter-terroristfinancing and sanctions policies, regulations and authorities.



26/77

P a g e | 26

This work is a key component of our governmentsnational securityeffortsit serves to protect the integrity of our financial system fromabuse by terrorists, drug traffickers and other illicit actors and gives ustools to impede and halt their dangerous activities.

Several primary authorities and activities drive the Treasury Departmentswork to combat money laundering and terrorist financing.

They include our role through the Financial Crimes EnforcementNetwork (FinCEN) as administrator of the Bank Secrecy Act (BSA),which enables us to impose special regulatory measures andrequirements to combat money laundering and terrorist financing on abroad array of financial institutions.

They also include authorities delegated to us by Executive Orders issued

pursuant to the International Emergency Economic Powers Act (IEEPA)to impose financial and economic sanctions, based on all-sourceintelligence, to disrupt and dismantle illicit financial networks, such asthose that support weapons of mass destruction, proliferation, drugtraffickers, transnational organized criminal groups and terrorists.

Given the maturity, scope and depth of the anti-money laundering andcounter-terrorist financing regime today, Treasury works closely with itsinteragency partners in the regulatory, law enforcement, and nationalsecurity communities, as well as the private sector, to combat the various

illicit financing threats we face.

Furthermore, given the increasingly global nature of the financial system,our efforts to strengthen our own anti-money laundering andcounter-terrorist financing regime rely on cooperation and collaborationwith international counterparts.

Nature and Scope of the Threat

Financial crime and associated money laundering activity are difficult tomeasure with great precision.

But by any estimate, the total amount of illicit money moved through andconcealed within the U.S. financial system is massivein the hundreds of



27/77

P a g e | 27

billionseven if it represents only a small percentage of the funds in thefinancial system.

The sheer volume of money moving through the banking system makesbanks the primary and most important line of defense against money

laundering and terrorist financing.

Therefore, our regulatory framework was built to require banks and otherfinancial institutions to take a number of precautions against financialcrime, including the establishment of AML programs and reporting andrecord keeping requirements to provide useful information to lawenforcement and national security authorities for the purpose ofcombating the full range of illicit finance.

This includes screening clients and transactions against Treasurys

Specially Designated Nationals (SDN) Lista list of drug traffickers,proliferators, terrorists and other illicit actors or entitiesto help ensurethat funds associated with these actors do not enter the financial system.

This regulatory framework aids banks in identifying and managing risk,provides valuable information to law enforcement, and creates thefoundation of financial transparency required to apply targeted financialmeasures against the various national security threats that seek to operatewithin the financial system.

However when these safeguards are not stringently enforced, moneylaunderers, terrorist financiers and other illicit actors are able to takeadvantage of the U.S. financial system.

Some recent civil enforcement actions by FinCEN and the federalbanking regulators illustrate how this can occur:

- In one case, failure to effectively monitor foreign correspondentbanking relationships with high-risk customers and file suspiciousactivity reports (SARs) resulted in the processing of $420 billion in

cross-border financial transactions with thirteen high-risk Mexicancasas de cambio from 2004-2007, through wire transfers, bulk cashand pouch and remote deposits, including millions of dollarssubsequently used to purchase airplanes for narcotics traffickers.



28/77

P a g e | 28

- In several cases, foreign banks stripped out the names of Iran orother sanctioned entities in transactions routed through the UnitedStates, resulting in billions of dollars of benefits to sanctioned parties.

A Swiss bank developed elaborate procedures to alter payments andused code names to disguise identities of sanctioned entities.

A Dutch bank used misleading payment messages, shell companiesand even advised sanctioned clients on how to conceal theirinvolvement in U.S. dollar transactions.

- One banks failure to have a written AML policy and inadequateprocedures to ensure the timely reporting of suspicious activityresulted in the processing of billions of dollars through accounts

controlled by thirteen Mexican casas de cambio in just one yearwithout filing suspicious activity reports.

- Inadequate AML staffing and procedures at another bank resulted indeficient monitoring and subsequent processing of large volumes oftravelers checks and third party checks indicative of moneylaundering, including through sequentially numbered instruments.

On account of these and other substantial vulnerabilities in anti-moneylaundering and counter-terrorist financing and sanctions compliance, the

United States government has instituted criminal fines and forfeiturestotaling more than $4.6 billion in approximately 20 BSA and IEEPAcriminal prosecutions of financial institutions over the past 6 years.

These civil and criminal enforcement actions reveal not only how illicitfinanciers abuse our banking system, but also how compliance with ouranti-money laundering and counter-terrorist financing and sanctionsrequirements is critical to protecting our financial system from suchabuse.

Improving Our AML/ CFT Regime

These cases also point to significant vulnerabilities in the framework andenforcement of anti-money laundering and counter-terrorist financingrequirements that require immediate attention.



29/77

P a g e | 29

Treasury is working together with its interagency partners and the privatesector to better understand the anti-money laundering andcounter-terrorist financing and compliance challenges faced by financialinstitutions, clarify U.S. government expectations of financial institutions,and strengthen the overall anti-money laundering and counter-terroristfinancing regulatory regime.

I will briefly outline just a few of our efforts.

Ongoing Targeting of I llicit Actors

One of the most important activities for which my office is responsible isthe listing of illicit actors on OFACsSDN list.

As banks and financial institutions screen their business dealings againstthe sanctioned entities on this list, they are able to prevent the entrance ofterrorist funds, drug-trafficking proceeds or other illicit money into ourformal financial system, or freeze transactions by designees where theyoccur.

All major global banks, and many smaller foreign ones, screentransactions against the OFAC list to protect themselves, even thoughthey are not required to do so.

This markedly amplifies the impact of our sanctions by preventing themovement of illicit funds by terrorists, organized crime figures orproliferation networks outside of U.S. jurisdiction.

We watch closely for illicit actors evading anti-money laundering andcounter-terrorist financing controls at banks in the U.S. and abroad andfor their attempts to seek back door entry into the financial system,including through the various evasive tactics evident in the casesdescribed above.

Customer Due Diligence Advance Notice of Proposed Rulemaking

Customer due diligence, and the financial transparency it facilitates, iscentral to our efforts to combat all manner of illicit financial activity, from



30/77

P a g e | 30

proliferation and terrorist financing to more traditional forms of financialcrime like money laundering and securities fraud.

Treasury issued an Advance Notice of Proposed Rulemaking (ANPRM)on March 4 to clarify, consolidate and strengthen customer due diligencerequirements for financial institutions, including an obligation to collectbeneficial ownership information.

This rulemaking will improve financial institutionsability to detectsuspicious activity and provide more useful information to lawenforcement.

The comment period for the ANPRM closed on June 11 and Treasury willhold the first in a series of public hearings to collect additional comments

on July 31.

Our engagement with industry in the customer due diligence rulemakingprocess is facilitating a broad understanding of higher risk type accountsand transactions with respect to money laundering and terrorist financing,and how we can work with industry and our interagency partners to betteridentify and manage such risks, including through more effectiveanti-money laundering and counter-terrorist financing safeguards.

Enhancing Transparency in the Company Formation Process

Criminals can easily disguise their ownership and control of illicitproceeds through shell companies and other seemingly impenetrablelegal structures.

We are working closely with you, Mr. Chairman, and other members ofCongress to enact legislation requiring disclosure of beneficial ownershipinformation in the company formation process.

Promoting and Strengthening the Global AML/ CFT Framework

Helping to strengthen anti-money laundering and counter-terroristfinancing regimes abroad has a direct benefit to the safety and integrity ofthe U.S. financial system, given the global nature of money laundering



31/77

P a g e | 31

and the terrorist financing threat and the relationships between banksabroad.

The Office of Terrorism and Financial Intelligence (TFI) works withothers in the U.S. government to strengthen the global anti-moneylaundering and counter-terrorist financing framework as a foundation forthe effective implementation of sound financial controls worldwide.

Several intergovernmental and international organizations, such as theFinancial Action Task Force, the IMF, the World Bank, the UnitedNations, and various FATF-style regional bodies, collectively develop,assess and facilitate jurisdictional implementation of measures that areessential to combating various forms of illicit finance.

Treasury and its interagency partners play a key leadership andparticipatory role in these organizations as well as other organizationsthat support our capacity building objectives, lending technical expertisein standard-setting, evaluation and policy recommendations related to thecombating of money laundering, terrorist and proliferation financing.

One of the key substantive accomplishments that we have achieved indeveloping the global anti-money laundering and counter-terroristfinancing framework is to integrate targeted financial sanctions againstterrorist financing and proliferation finance into the global standards for

combating money laundering.

This is some of the most innovative work my office conducts and an areain which we are able to urge the international community forward inhighly constructive ways.

Conclusion

I began todays testimony by noting that the U.S. is home to one of thestrongest anti-money laundering and counter-terrorist financing systems

in the world.

In order to continue in this role, we must push ourselves to identify wherewe can do better, and work tirelessly to get there.



32/77

P a g e | 32

I look forward to continuing work with this committee to this end.

Thank you.



33/77

P a g e | 33

NUMBER 3

FI proposes higher requirements for the banks liquidity buffers

Sweden shall act ahead of the EU and introducequantitativerequirement s regardin g the ban ks liqu idit y bu ffers .

The aim is to ensure that large banks and credit institutions holdsufficient liquid assets to be able to manage short periods without accessto market funding.

This is proposed by Finansinspektionen in a new regulation.

***

Finansinspektionen proposes quantitative requirements regarding theliquidity buffers held by large banks and credit institutions.

To further contribute to a stable and smoothly-functioning financialsystem Finansinspektionen also wants the levels of the liquidity buffers tobe made public.

The requirement for a liquidity coverage ratio means that a banks liquidassets must manage outflows over a period of 30 days of market stress.

The requirement is based on guidelines from the international BaselCommittee on Banking Supervision regarding a Liquidity Coverage Ratio(LCR), which are planned to be introduced within the EU during 2015.

The requirement to hold a liquidity buffer includes rules regarding whenthe buffer can be used.

It is proposed that banks under stress that affects liquidity are notrequired to meet the liquidity coverage ratio.



34/77

P a g e | 34

The companies affected are those with a balance-sheet total as of 30September of the previous year that is higher than SEK 100 billion.

The proposal applies to financial groups on group-level and is not appliedto individual companies that are part of a group.

At present, eight companies in Sweden would be covered by thisregulation.The proposal will come into force on1 January 2013.

About Finansinspektionen

The Swedish Financial Supervisory Authority, Finansinspektionen, is apublic authority.

Our role is to promote stability and efficiency in the financial system aswell as to ensure an effective consumer protection.

We authorise, supervise and monitor all companies operating in Swedishfinancial markets.

Finansinspektionen is accountable to the Ministry of Finance.

We supervise 3,900 companies

- Banks and other credit institutions

- Securities companies and fund management companies

- Stock exchanges, authorised marketplaces and clearing houses

- Insurance companies, insurance brokers and mutual benefitsocieties



35/77

P a g e | 35

NUMBER 4

Building deeper economic union: what to do and what to avoidSpeech by Jrg Asmussen, Member of the Executive Board of the ECB,Policy Briefing at the European Policy Centre, Brussels, 17 July 2012

Ladies and gentlemen,

The crisis has made us all a few experiences richer.

The question is whether we can draw the right lessons from thoseexperiences.

After all, experience is the name everyone gives to their mistakes[Oscar Wilde].

And there have been a few mistakes in the way economic policies and

governance were managed inside monetary union.

Policies and governance clearly needed to be strengthened.

What is less clear is how best to do it.

What to do and what to avoid is what I would like to discuss today.

Thanks for inviting me to share my thoughts with you here at theEuropean Policy Centre.

Without a doubt: over the past two years, much has happened in the fieldof economic governance.

There have been a lot of proposals; the number of suggested Pacts,Compacts, Agreements and Treaties is almost inflationary.



36/77

P a g e | 36

We are having a healthy debate about the future of EMU. But it is notonly talk.

The report Towards a genuine Economic and Monetary Unionpresented to the June European Council by the four Presidents van

Rompuy, Barroso, Juncker and Draghi sets out a shared vision for EMUover the next decade.

Its content will be fleshed out over the coming months. But the devil is, ofcourse, in the detail.

Let me structure my thoughts around three main themes:

Are we on the right path with the reforms so far?

Are we tackling the right issues with reflections currentlyunderway?

What does this imply for the ECB?

1. Are we on the right path with the reforms so far?

Here in Brussels, much of the attention is naturally focused on Europeaninstitutions and processes.

But we should not deceive ourselves: The proper management of euroarea economy needs both EU and national action.

Any governance process at European level is only as good as its record ofactual application.

That needs determined action by those responsible at the EU levelnotably the Commission and the Council.

And of course, implementation at national level.

On paper, significant progress has been achieved at EU level with thesixpack, the Fiscal Compact and the 2012 European Semester.

This package of reforms has the potential to fundamentally change theway we conduct mutual surveillance.

http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-compliance-association.com/http://www.risk-comp

Documents

Risk Management Presentation July 23 2012