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SanctionsRiskManagement Symposium
September 18-19, 2017 | The Princeton Club | New York, NY
incooperation with
SaskiaRietbroekPrincipal
SanctionsAlert.com(moderator)
It'sNotJustAbouttheListsAnymore:UsingCDDtoDetectHiddenUBOsandProhibitedEnd-Users
Tuesday,September19,2017,9:30– 10:30AM
TylerHandGlobalHeadofSanctions,
Interdiction&Anti-Corruption
WesternUnion
CarltonGreenePartner
Crowell&MoringLLP
KarenRobertsonGlobalTradeComplianceManager
UberTechnologies,Inc.
AndersA.L.Rodenberg,
HeadofFinancialInstitutions&Advisory
BureauvanDijk
1
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
2
TylerHandGlobalHeadofSanctions,Interdiction&Anti-CorruptionWesternUnion
ScreeningandRegulatoryExpectationsonUseofEnhancedData
“Investmentincapabilitiesisprojectedtoincreasefor89%ofinstitutionssurveyedintheAccenture2017ComplianceRiskStudyoverthenexttwoyearsasinstitutionsmanagethedemandsofthedigitalage.”
- “2017ComplianceRiskStudy”AccentureConsulting
“[Institutions]wanttocomplyandwanttheirsignificantinvestmentsmadeincompliancetoactuallyhelpprotectpublicsafetyandsecurity....”
- “AML:theTechFactor,”TheClearingHouse,GaryShiffman &GrantOak(2016)
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
RegulatoryExpectationsarenotperfectlyclear,butsomekeyfactorshavebeenidentified:
§ NatureoftheRelationship– directorindirect- with3rd party(ownershipduediligenceisexpectedwhenthereisadirectrelationship)§ OFACFAQ116
§ Geography associatedwiththe3rd partyoritstransactionsmayindicateneedforgreaterduediligence§ OFACCrimeaSanctionsAdvisory(7/30/2015)
§ Classoftradeorindustrysectorofthe3rd partymayindicateaneedforgreaterduediligence§ TheUseofExchangeHousesandTradingCompanies(1/10/2013)
§ Paymenthistorymayindicatetheneedforgreaterduediligence
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
§ Listsofgeographictermsassociatedwithsanctionedjurisdictions(e.g.,“Sevastopol”or“Persian”)
§ Listsofpartiesknowntobeactingfororonbehalfofsanctionedgroupsorentities(e.g.,membersoftheTaliban)
§ Listsofpartiesidentifiedthroughnegativemedia,publicreports,etc.asassociatedwithsanctionedpartiesorjurisdictions
§ Listsofpartiespotentiallyowned/controlledbyoraffiliatedwithsanctionedpartiesbasedoncorporateregistriesmaintainedbygovernmentagencies
§ Deeperdiveduediligence,includingresearchofin-countrypublicrecordshumanintelligence
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
VendorResourcesincludeenhanceddatalistsandotherservices
§ TrackregulatoryguidanceissuedbyFATF,OFACandotherofficialbodiesandincorporateitintocultureandprogram
§ UseyourRiskAssessmenttoidentifyareaswherethirdpartyresourceswouldbemostbeneficial
§ KnowYourVendor– understandwhatprocessestheyusetoassembledataorperformservicesand
§ Benchmark withcounterpartsatpeerinstitutions
§ Focusonmitigationofrealrisk(don’tuseresourcesorcreateprocessesthatarenoteffectiveinmitigatingrealrisk)
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
KeyConsiderationsforUsingVendorResourcestoMeetRegulatoryExpectations
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
7
KarenRobertsonGlobalTradeComplianceManagerUberTechnologies
IdentifyingHigh-riskAreasOfYourBusinessForExportControl
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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CommonRiskFactorsandBehaviors
1.Information“blackholes”§ Providehighlevelresources/generalguidelinestoeaseyourbusinesspartnersinto
compliance,thattheycanreferencebeforeengaginginriskygeographiesorwithpartnerswithredflags.
§ Digdeeperintocustomersexhibitingstrangepurchaseorpaymentbehaviortocreateusecasesforfraud,illicitactivities,lackofoversight,violationsoftermsofservice,andgeneralmisbehavior.Whatistheirhistory?
2.Resistancetointernaltrainingreducesvisibility§ Meetbusinessobjectionstocomplianceheadon,withfirmregulatorybackingand
top-down communicationtoreinforcethe messagethatcomplianceiskey!
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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CommonRiskFactorsandBehaviors(Cont.)3.Thinklocally,prepareglobally§ Insertclassificationreviewsasearlyinproductplanningstageswithtechnicalteamsaspossible,
soyoucanhelpguideandscopeimpactsofproductchangestoexport/importabilityinfuture.§ StandardprocedureforEDDshouldbeapplicableglobally,evenifthedetailschange--whereyou
mightuseabusinessregistrationdocumentinonecountry,anothercountrymaynothavetheequivalentsofindthoseparallelsandgatherasmuchaspossible.
4.Whattypeofcustomersdowereallywanttodobusinesswith?§ Pushpastbareminimumtothinkaboutriskandduediligenceholistically: TaketheDenied
PartiesScreeningandDunn&Bradstreet riskreviewsfurtherbyaddingintoscope:PEPs,highriskkeywords(e.g.nuclear,explosives,placenames,etc.), knownbutnotyetsanctionedterroristandhategroups.
§ Categorizecustomersbygeopoliticalrisk,industry/sector,productlines,outofordinarypurchasing,shipping,orpaymentbehaviors.
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
10
CarltonM.GreenePartnerCrowell&Moring
FinCEN’s CustomerDueDiligenceRule
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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FinCEN’s CustomerDueDiligenceRuleRequirementtoObtainBeneficialOwnershipInformation
§ Banks,broker-dealers,mutualfunds,FCMs,andintroducingbrokersincommodities(CoveredFinancialInstitutions)mustobtainidentifyinginformationonthebeneficialownersoftheir“legalentitycustomers”§ Eachindividualthatdirectlyorindirectlyowns25%ormoreequity§ Onepersonwith“significantcontrolresponsibility”(e.g., CEO,CFO,COO,Managing
Member,GeneralPartner,President,Treasurer)§ Identifiers(sameasCIPelementsforcustomers)§ Name§ DOB§ Address§ IdentificationNumber(TIN)– SSNorequivalent
§ Verificationofidentity– ifthroughdocuments,photocopiesareOK§ Canusestandardformincludedwithruleorequivalent
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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FinCEN’s CustomerDueDiligenceRuleRequirementtoObtainBeneficialOwnershipInformation
§ Canrelyoncustomer’scertificationofwhoqualifiesasbeneficialowners,butreliancemustbereasonable
§ Beneficialownershipinformationmayaffectafinancialinstitution’sobligations§ Sanctionsscreening(screenBOs,aggregatetheirinterests)§ CurrencyTransactionReports(aggregatetransactions)§ 314(a)Requests(accountsfor/transactionswithBOs)
§ MustrefreshBOeachtimea“newaccount”isopened,evenforexistingcustomers
§ MustconductongoingmonitoringofcustomersandrefreshBOandothercustomerinformationonariskbasis
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
13
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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AndersA.L.RodenbergHeadofFinancialInstitutions&AdvisoryBureauvanDijk
Howthe50%rulehaschangedSanctionscomplianceradically
50%rulechangedSanctionsCompliancefundamentally:SanctionedorNot?
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
ComplexexamplefromOrbis:Cascadedown,indirectandaggregationownership
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50%rulechangedSanctionsCompliancefundamentally:ChangeinOwnership
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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50%rulechangedSanctionsCompliancefundamentally:SectoralandOwnership
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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50%rulechangedSanctionsCompliancefundamentally:FailedmanualapproachinDelaware
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
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Sanctions Risk ManagementSymposium
September 18-19, 2017 | The Princeton Club | New York, NY
incooperation with
Questions?
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Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
BonusSlidesProvidedby
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Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
FinancialCrimesEnforcementNetwork(FinCEN)
§ PartofU.S.Treasury§ Establishedin1990§ Safeguardsthefinancialsystemfromillicituseandcombats
moneylaunderingandpromotesnationalsecuritythroughthecollection,analysis,anddisseminationoffinancialintelligenceandstrategicuseoffinancialauthorities.
www.fincen.gov
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Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
CustomerDueDiligence(CDD)
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§ Compilationoffactsaboutacustomer,prospectorbusinesspartner§ Enablesacompanyorfinancialinstitutiontoassesstheextentto
whichthisentityorpersonexposesittoarangeofrisks§ Includesmoneylaundering,terroristfinancingandsanctionsrisks.§ Useofrisk-basedapproach
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
OFAC50%ruleexample
CourtesyofBureauvanDijk
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
OFACEnforcementActionAgainstExxonMobil
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§ July20,2017§ $2Mpenalty§ FirstOFACcaseinvolvingviolationsofRussia/Ukrainesanctions§ Dealtinservicesofindividualwhosepropertywasblocked§ SignedlegaldocumentsrelatedtooilandgasprojectsinRussiawithIgorSechin,PresidentofRosneft,andanindividualidentifiedonOFAC'sSDNlist
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
CustomerIdentificationProgram(CIP)
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§ 31CFR1020.220 (FinCEN)§ ImplementedSection326ofthe
USAPatriotAct§ Mustbe
§ written§ appropriateforsizeandtypeof
business§ incorporatedintoBSA/AML
complianceprogram
§ Minimumrequirements:§ Name§ Dateofbirth§ Address§ IDnumber
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
OFAC’s50%Rule
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§ Anyentityowned intheaggregate,directlyorindirectly,50%ormorebyoneormoreblockedpersons,isitselfconsideredtobeablockedperson.
§ Rulespeaksonlytoownershipandnottocontrol.§ AU.S.personmaynotengageinanytransactionswithsuchanentity,unlessauthorizedbyOFAC.
§ RuleappliestoentitiesonboththeSDNListand SSIList.
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
BankSecrecyAct(BSA)
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§ Enactedin1970§ PrimaryU.S.anti-moneylaundering(AML)law§ 31USC5311 etseq§ EstablishesAMLprogram,recordkeepingandreportingrequirements forfinancialinstitutions
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
BeneficialOwner
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Ingeneral,thenaturalperson(s)whoultimatelyownsorcontrolsacustomerand/orthenaturalpersononwhosebehalf
atransactionisbeingconducted.
Italsoincludesthosepersonswhoexerciseultimateeffectivecontroloveralegalpersonorarrangement.
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
August2017U.S.SanctionsAgainstVenezuela
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Impacting oil company Petroleos de Venezuela (PdVSA), andother Venezuelan government entities.
As sanctions were not “list-based” they place heavy burdens oncompliance and due diligence programs for companies andfinancial institutions doing business with the Venezuelangovernment and related entities.