Swift outlines ‘compliance utility’ ambitions; plans for next stage of gpi project

Swift outlines ‘compliance utility’ ambitions; plans for next stage of gpi project

Banking cooperative Swift has unveiled a number of initiatives designed to address the compliance challenges facing banks and corporates.

The unveiling came at a Swift Business Forum in Zurich where Swift executives, corporate treasurers and bankers addressed member banks on a range of topics, from financial crime compliance to Switzerland’s fintech scene.

Of particular interest to Swift members are the Society's plans to further expand its financial crime compliance product portfolio to build a compliance utility that will help banks to meet their ever-growing compliance challenges.

“Every time there is a common issue for the industry, there is an opportunity for a utility like Swift to provide a solution,” said Alain Raes, chief executive, Apac and Emea, Swift.

This ambition is in keeping with the concept of Swift acting as a common mechanism for the industry, said Raes. “Swift is a trusted network, it is owned by the banks and it provides useful services, promoting standards and security. For all of the challenges in compliance it helps to have standards that you can adopt and show to regulators. The standards that Swift develops are based on the input from Swift members and that should help it to become a compliance utility provider.”

Sanctions screening has been highlighted by banks as one key area where technology can help. Daniel Fernandez, head of Global Sanctions Programs at Credit Suisse said: “We are looking at machine learning, robotics and artificial intelligence and how they can help us to define patterns in payments.”

Fernandez also stressed the case for more collaboration between banks. “Collaboration is the future but we do not yet have the infrastructure yet for enabling firms to profit from shared information.”

Swift’s product portfolio for financial compliance was unveiled by Thomas Preston, sanctions and AML solutions manager, who described a set of utility solutions developed by Swift to increase compliance standardisation and efficiency while better managing related cost and risk.

Screening Solutions
• Name Screening: Swift’s new on-line portal for checking individual names against sanctions, PEP and other lists
• Sanctions Screening: Hosted transaction screening solution for cost-effective compliance with sanctions regulations
• Sanctions Testing: To maximise the effectiveness and efficiency of banks’ sanctions environment

Analytics Solutions
• Compliance Analytics: Provides enhanced understanding & management of financial crime-related risk
• Payments Data Quality: A post-fact reporting tool to help banks identify and address possible violations of FATF Recommendation 16.
• Daily Validation Reports: Hosted service providing secondary control for improved visibility on payment activity and fraud risks

KYC Solutions
• The KYC Registry: A utility that allows financial institutions to exchange KYC information securely with their correspondent banks.

The Swift Business Forum also gave co-operative an opportunity to showcase its latest payments project – Swift global payments innovation (gpi).

Swift gpi was launched in December 2015 as an attempt to address the problem of cross-border payments that were seen as slow, expensive and difficult to trace. Under gpi, these payments would be ‘same day’, transparent in respect of fees and traceable across all borders.

Now, more than one year on, the initiative has close to 100 participating banks covering 224 countries and 12 banks currently live with payments across 60 country corridors.

Swifthas launched to three new products as part of gpi - a directory that lists all banks active on the platform; an observer that shows which banks are living up to the SLA they signed up to as part of gpi and those that are not; and the tracker, which enables users to monitor and trace transactions across their payment journey.

The service has been well received by corporates that have been long frustrated by the deficiencies in cross-border payments. As Martin Schlageter, head of Treasury Operations at Swiss healthcare conglomerate Roche, said: “The cross-border payments process is like a black box. But these are more than just payments, they are an important part of the global supply chain. If that payment does not get through, the product does not get shipped.”

The pressure from disenchanted corporates plus regulatory pressure and the emergence of alternative payment providers may have finally forced the banks to act but they are now looking to make up for the earlier inertia, said Paula Roels, head of market infrastructure & Industry initiatives, Institutional Cash Management, Deutsche Bank. “It is important that we do not stop here,” she said.

Swift is already designing a second version of gpi, which will include a stop and recall payment service, a rich payment data service, and an international payments assistant service. In parallel and in a third phase Swift has launched a DLT proof of concept for real time reconciliation to explore further technology innovation in the cross-border payments process..

While the potential of DLT is undeniable there is still some progress that needs to be made for the technology to be viable for financial institutions, said Damien Vanderveken, head of R&D, Labs and UX at Swift.

He pointed to the need for more governance, an identity framework, compliance with anti-money laundering rules, scalability and cyber defence as some of the key requirements for the blockchain to be used over the Swift network.

While 2016 involved working with a number of Swift customers and start-ups on the viability of DLT, 2017 will be about developing proof of concepts via a cloud-based, DLT sandbox, said Vanderveken.

The first use case will be for gpi. “It is all about assessing new technology,” said Vanderveken. “It will be some time before the technology becomes available but it is important to start the process now.

This project will look into the use of DLT for nostro reconciliation. The technology will be used to provide a real-time view on liquity, rather than end-of-day using a blockchain shared between the bank owning the nostro account and the correspondent bank servicing it.

A PoC group composed of a few gpi member banks has started work on how the service will be built and what will be stored on the ledger, said Vanderveken. Development will then start with the aim of having a PoC finished by September and written up in time to be launched at Sibos in late 2017.

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