Swift boosts collaboration push with Financial Crime Compliance unit

Meurant: sensing “a big shift in the industry”

Swift has created a dedicated Financial Compliance Services unit to manage a growing number of service offerings. The new unit will focus initially on the development of a Know Your Customer Registry planned for launch later this year as well as the integration and development of existing services.

The Brussels-based industry consortium is building an international team of sanctions, KYC and anti-money-laundering experts headed by Luc Meurant, head of banking markets and compliance services at Swift. Meurant said that Swift is making a “massive investment” in the new unit and he expects to have around 100 staff by the end of this year, through a combination of internal reorganisation and recruitment.

One of the first initiatives under the new structure will be the creation of a global KYC Registry – a centralised utility for the collection and distribution of standard data banks need  for due diligence processes that is intended to “help banks to manage compliance challenges” and reduce costs by providing access to a central repository of up-to-date institutional information collected by Swift from participating banks.

Swift will host and manage the utility, verifying the completeness, validity and accuracy of the data, while member banks will retain ownership of and responsibility for their own information. The KYC Registry will initially focus on correspondent banking requirements, which Swift says “is the most urgent challenge facing the industry”, but it may subsequently extend it to other areas.

The development and marketing of services building on Swift traffic data has been a theme of the organisation for several years now, and “collaborative compliance” was the central message delivered by chief executive Gottfried Leibbrandt and chairman Yawar Shah at the opening plenary session of Swift’s annual Sibos conference in Dubai last September.

Swift’s first venture into compliance services was in 2011 with the introduction of a centralised Sanctions Screening service, partly based on FircoSoft’s filtering application and list update service, to provide a screening service for small- and medium-sized institutions. That currently has 150 users in 65 countries, said Meurant,

This was later complemented with the addition of a Sanctions Testing Service aimed at larger institutions, developed in partnership with AML specialist Omnicision. Meurant declined to name customers for this service, but said that nine out of its 20 largest members are using it.

“We are sensing a big shift in the industry and even more demand for us to offer these services,” said Meurant. “Banks are very keen on further using their Swift traffic data and applying a compliance lens to it. They have been using traffic data for business development purposes and now they have come to the conclusion that this can be highly effective from a risk and compliance perspective.”

He added that there “will be another product coming in a couple of months that we call Business Intelligence for Compliance to address the monitoring aspects”. This also stems from an earlier partnership with an external developer: in early 2012 Swift announced that MicroStrategy had been chosen as its standard enterprise business intelligence and analytics platform.

“The concept of what banks can do and what Swift can do is shifting,” said Meurant. “To me the biggest challenge is in the area of liabilities. Clearly, what will not happen is a shift in liabilities from the banks to Swift –that is not something that can happen. We always need to think ‘what is a relevant service that we can centralise and offer that gives efficiencies for the banks while managing the liability issues’.”

The concept of global sharing also raises regulatory issues at a time when many national governments and regional legislators are taking an increasingly nationalistic stance on data protection. For the KYC Registry “the data will be shared in Europe, so clearly protected by European data privacy laws, but there are other legislations that we will have to cope with, where there are a number of restrictions we face in terms of what information can leave the country, but that is an issue that banks already face today. Fortunately, at this stage we are talking about only a handful of countries out of the 212 that we intend to cover,” said Meurant.

Compliance is just one of the areas where Swift sees itself becoming a neutral provider of services based on messaging data. In the area of intraday liquidity, for instance, it has provided monitoring capabilities for some time, but is now looking at the possibility of creating a service whereby it would be able to provide banks with liquidity data not only for regulatory reporting but also for their own risk calculations.

“The key message is that this an important step but it is not the end of the journey,” said Meurant. “The demand we are getting from our community is much broader, and we have a strong mandate from our board to move fast and boldly in this field.”