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AML Policy-Name Screening Process - Annexure 3

Compliance DepartmentCargills Bank Ltd

Title : Name Screening Process

To Whom : Sales Staff, Branches, Operations, Correspondent Banking,Retail Banking, Remittances, Business Banking, Trade Finance,Credit Cards, Loans, Retail Credit

Purpose

● The specified teams above as the first line of Defense, should take Accountability,Responsibility and Ownership for Screening of Customers/Entities as part ofCustomer Due Diligence which is a mandatory requirement.

● This instruction note explains the rationale of conducting Name Screening toenhance Compliance Monitoring and Improving Transparency andAccountability in terms of determining whether any of the Bank’s existing orpotential customers are part of any blacklists or regulatory lists, which can exposethe Bank to Risks, so that action can be taken to mitigate and control same.

● This is also a mandatory in order to mitigate the AML, Sanctions and TerroristFinancing risks related to the financial services industry as a whole.


Version Control

Date Version Author Description15.05.2018 V1.1 Summaiya Macan Markar Name Screening Process

Approval History

Document Owner

Date Version Approved by:

Business Unit/ Department

Compliance Department


Contents

1.0 Introduction.............................................................................................................. 4

1.1 World-Check 1 (Integrated into Compass AML System)................................. 4

1.2 World Check Features....................................................................................... 5

1.3 Internal Negative Lists.......................................................................................5

2.0 Name screening - Overview..................................................................................... 6

3.0 Name Screening - Step-by-Step Instructions........................................................... 8

4.0 Name Match Discounting.......................................................................................13

4.1 False Match Discounting................................................................................. 13

4.2 True Match Discounting..................................................................................13

5.0 Sanction Lists......................................................................................................... 14

5.1 UNSCR, FATF Country list, OFAC lists, other regulatory lists.....................14

5.2 UNSCR Obligations........................................................................................ 15

6.0 User Guidance........................................................................................................ 16

6.1 Close Matches..................................................................................................16

6.2 Match Score.....................................................................................................17

6.3 Match Identifiers..............................................................................................17

7.0 True matches against Politically Exposed Person’s (PEP) name...........................19

8.0 Name Screening Reviews.......................................................................................20

8.1 Name Match Reporting....................................................................................20


1.0 Introduction

Banking and Financing is a specialized industry in which entities are bound to complywith regulatory and legislative requirements. The heightened level of Risk to ML/TFand Sanctions Banks are exposed to and makes it mandatory to take necessaryproactive measures to protect it’s business, customers, brand and reputation in thefinancial industry. Non-compliance of with, could lead to Regulatory, Financial andReputational risks.

As a minimum Banking requirement, conducting Know Your Customer (KYC) andCustomer Due Diligence (CDD) is important measure to mitigate risks posed to theBank. Name Screening can be defined as one of that main elements of KYC/CDD asa control and mitigate factor.

Name Screening Process

Name screening is the process of determining whether any of the Bank’s customers(new and existing), or the counter parties/agencies etc., that they deal with, are part ofany regulatory black lists or high risk category. In the event of the Bank’s customer orthe persons with whom they deal with match any of the listed individuals or entitieson the watch list/blacklist, the Bank is required by way of regulation to investigate,monitor and where required to report such matches to the designated authority,i.e. Financial Intelligence Unit (FIU) of the Central Bank of Sri Lanka (CBSL) aspotential Money Laundering, Sanctions, Terrorist Financing cases or Suspiciouscustomers.

Under the Risk Based Approach adopted by the Financial Transactions Reporting Act(FTRA) No 6 of 2006, the Bank is required to have a standard procedure in place forconducting ‘Enhanced Due Diligence (EDD)’ when dealings with Politically ExposedPersons (PEPs) and other High Risk customers.

To comply with this, the Bank has subscribed for Worlcheck 1 which is afully-fledged automated system managed by Thomson Reuters.

1.1 World-Check 1 (Integrated into Compass AML System)

World-Check1 was subscribed to by the Bank in July 2017 as a Risk ManagementSolutions suite. It comprises of a comprehensive database of Politically ExposedPersons (PEPs), Black Listed individuals/entities and Sanction Lists.

World-Check1 is integrated to the Bank’s Compass AML system which enablesmultiple users to access the database simultaneously. World-Check1 also producesextensive and comprehensive intelligence on sanctioned individuals, entities andjurisdictions. The system monitors all such lists 365 days a year 24 hours a dayaround the globe with special focus on major lists such as OFAC, UNSCR, EU,UKHMT, Swiss SECO, French MINEFI, DFAT Australia, Hong Kong HKMA,


Singapore's MAS, Japan's JMOF and Canada (“major sanctions authorities”). It is acomprehensive source to conduct Customer Due Diligence and helps satisfyregulatory demands for KYC (Know Your Client), AML, CFT, PEP Due Diligence asa third party risk program.

1.2 World Check Features

The system enables users to screen names online whereby names can be typed inindividually and potential matches are identified by the system. The data fed to the“name” field is compared against the negative lists data base and the system isdesigned to provide immediate feedback to the query.

World-Check content is derived from many different sources including lists ofregulatory and law enforcement entities, Sanctions, PEPs and other bodies. Bysearching on any of these keywords in the “KEYWORD SEARCH” field, the user cancall up the required lists content from within the World-Check database.

1.3 Internal Negative Lists

Apart from these lists, the Bank has its own specific negative list: i.e. Black list whichis required to be kept confidential.

This list is also integrated to the Compass AML software, system of the Bank and isalso screened against with as part of the screening process.


2.0 Name screening - Overview

The following grid displays parties/elements that requires Name Screening to beperformed including all the Customer Identification Files (CIFs) created in CBS.

Activity Type Names to be screened

Time line: At the time of On-Boarding or prior to effect a Cross Bordertransaction / Upon a Trigger event/ Suspicion

Individuals Account Holder and all joint holders

Proprietorship Name of the firm and Proprietor/ Authorised signatories

Partnership Firms Name of the firm and all Partners

Companies Name of the company followed by Directors, Authorised Signatories, UltimateBeneficial Owners (UBO) as identified based on the Shareholding pattern.

Trusts Name of the Trust, Trustees, Beneficiaries, Beneficial Owners as identified,Authorised Signatories

Club, Association,Society

Name of the Club, Association, Society followed by Authorised Signatories;Members of the Governing body, Office Bearers

CorrespondentBanks

Name of the Bank, Authorised signatories, Country of Bank, UltimateBeneficial Owners (UBO), Directors

Cross borderremittances

Counter parties (Remitter & beneficiary), Intermediary Banks, Countries

Trade transactions Counter parties, Intermediary banks, vessel, shipping company, countriesinvolved, Ports or any other relevant proper nouns involved in the transactions.

Treasurytransactions

Counter parties, Intermediaries

Credit cards Name of Primary holder, Name of Supplementary Card Holders

LoanCustomers/Creditappraisals

Name of Customer; Directors of the corporate customer,Ultimate BeneficialOwners (UBO)/ Joint Venture Partners / Associates; Country of the customer;Country of the intended use of the funds; Trade Related parties; Country ofTrade related parties etc.Authorised Signatories


Special Notes:

● In case of any account relationship modification/addition i.e. account holdername/s or KYC information (Address/Contact Number/ID number etc.) therespective names to be re-screened as applicable for each activity typementioned in the above table. Documentary proof is required for all suchchanges.

● i.e. Account holder name, joint holders, Directors, UBOs, Authorised Signatoriesor any other KYC information the name of the customer has to be screened andwith proper documentary proof.

● In case of any Individual/Entity name is mentioned as “Power of Attorneyholder”, it has to be screened and with proper documentary proof.

● In case of any Minor account, name/s of the Parent/s or Guardian need to bescreened with proper documentary proof.

● As part of Enhanced Due Diligence being conducted, Compliance may requirethe relevant Branch/team to screen further individuals/entities other than thoselisted in the above table.


3.0 Name Screening - Step-by-Step Instructions

The indicative guidelines below will help the user to determine a True match and toarrive at the decisions/discounting a Name Match :

Step 1. Log into the AML system by way of the link provided in the bank’sintranet;

Step 2. Log in to the system by entering the User Name & Password.


Step 3. Select “Real Time Scanning”

By Clicking on the Real Time Scanning module in the main menu tray, the windowthat is displayed allows you to scan a name against a list.

-The fields in the Entity Search form need to be filled, as illustrated below.


Step 4. Enter the required Name in the allocated field shown below; and press“Scan”

It is also possible to enter the Identification Number (Passport/NIC number) togetherwith the Individual/Entity name, if available.

Step 5. System will display the number of Name matches found against WorldCheck 1 - negative database integrated into Compass system.


Step 6. Compare all List IDs against match score.

It is required to check and evaluate all matches which carry a match score of 90% andabove in order to filter and verify only quality matches.

The remaining matches (Below 90%) can be considered as “False Matches”, subjectto non-matches found againstMatch identifiers.

Step 7. Click on each List ID that has 90% and above Match Score/s


Step 7. Details of the match can be viewed by the user when the “List ID” field isselected.

Likewise, all match results above 90% need to be checked against CustomerInformation, List name, List ID and the Match score. The user would be required tocarefully evaluate all such matches to identify the True Match among the listed.Please refer the Match Identifiers available in Section 6.3 to confirm as a “TrueMatch”.

Important:

▪ In case the match is confirmed as “True Match” and found as exact match basedon Identifiers (Irrespective of the Match Score), the user is requested to obtainCompliance clearance through the Head of Department.

▪ Any matches Below 90% threshold can be Discounted as “False Matches” andthe Account opening/transaction could be processed unless otherwise noidentifiers are found subsequently.

▪ Match findings together with the transaction details, customer and account detailsneed to be attached when referred to Compliance for clearance.

▪ For Trade related transactions, Nature of transaction, Amount, Nature ofGoods/Item and IMO number to be provided in addition to the match findings.

▪ Please refer the “Process flow for True Matches” below for further reference.


4.0 Name Match Discounting

By conducting the Name Screening process all False/True matches related toIndividuals, Countries, Organisations, entities, vessel etc. need to be discounted priorto proceed with the respective banking relationship/transaction. The users shouldfollow the discounting methods and be adhered thereby.

4.1 False Match Discounting

If the match is found as “False Match” (Irrespective of the Match Score) but not anExact match, the relevant business/account opening team can discount the match bycommenting “Name Match discounted due to False Match” by the User.

These type of matches need not to be referred to Compliance team unless otherwisethe match is specifically found as “Suspicious”.

It is mandatory to keep all records of findings along with the discountingcomments in hard copy format together with the account mandate/transactiondocument/s.

4.2 True Match Discounting

If the match is a “True Match” (100% or Irrespective of the Match Score), which isconfirmed with the match identifiers, the findings to be referred to the FinancialCrime Compliance (FCC) Team immediately through the Team Leader/Head of theDepartment to obtain Compliance Clearance prior to proceed with thecustomer/transaction.

▪ The name match required to be shared together with purpose of Account opening,source of funds, Transaction purpose, Amount, Beneficiary/location, Mode oftransaction and related CDD

▪ If it is a Trade related transaction, the nature of transaction, Amount, Nature ofGoods/Item & Vessel details/IMO number to be shared in addition to the matchfinding.

The Financial Crime (FCC) Compliance team will evaluate and assess the detailsprovided and shall respond to the respective Branch Manager/Relationship Managerto take appropriate action, i.e. to decline the case and file a STR on the subjectmatter.

In the event of a deviation, case would be accommodated subject to Enhanced DueDiligence. Further it may additionally need the Corporate Management /Head ofRetail Banking/Business Banking approval to proceed further.


5.0 Sanction Lists

5.1 UNSCR, FATF Country list, OFAC lists, other regulatory lists

Various International bodies recommend proactive measures to Combat MoneyLaundering and Terrorist Finance and they issue the identified negative or black listscomprised with National and Economic Sanctions, Government/Regulatory/Lawenforcement watchlists, PEP profiles and other black listed profiles such as Terrorists,Criminals and Narcotics.

Eg:

UNSCR - United Nations Security Council

FATF - Financial Action Task Force

OFAC - Office of Foreign Assets Control

EU - European Union

UN - United Nations

These sanction lists are issued from time to time in the following categories;

▪ Financial Sanctions, Diplomatic Sanctions - the reduction or removal ofdiplomatic ties, such as embassies)

▪ Economic sanctions - typically a ban on trade, possibly limited to certain sectorssuch as armaments, or with certain exceptions (such as food and medicine etc.)

Eg: Sanctions


5.2 UNSCR Obligations

As per directions issued by the Financial Intelligence Unit of the Central Bank byway of Circular 02/13 dated 29th October 2013, the Bank is required to prevent thoselisted on the said sanctions lists to conduct any transactions with the Bank and isfurther required to freeze funds, financial assets, or economic resources without delay.

Any matches against United Nations Security Council Resolution (UNSCR) list, theBank is obliged to identify and freeze funds, financial assets or economic resources ofsuch designated persons and entities immediately. Under the regulations issued basedon the United Nations Act No. 45 of 1968, the Bank shall immediately inform fullparticulars of the funds, other financial assets and economic resources held by suchcustomer on their books to the FIU within 24 hours and further a copy of the same tobe sent to the Competent authority, the Ministry of Defense, No 15/5, BaladakshaMawatha, Colombo 3.

Cost of non compliance on the aforesaid requirement, will result in an offense underthese regulations and shall on conviction by the High Court, be liable to imprisonmentfor a period not exceeding one year or to a fine not exceeding rupees five hundredthousand or both such fine and imprisonment.

The responsibility relating to the above for staff at Branches/accountopening/operations to keep the Compliance Department informed of anysuch instances and all correspondence with regard to the same will behandled centrally by the Compliance Department.


6.0 User Guidance

6.1 Close Matches

In instances when the name match score is high but the name suggests close match,the following examples will be helpful in arriving at a conclusion where additionalmatch identifier/s are required to determine the case;

Sr.No

Source name Name on Watchlist

Conclusion Reason

1 Gamarachchi SunilAriyarathne

Sunil Ariyarathne Positive Match on first two parts

2 Sanda Perera Sadamal Perera False Only surname match

3 Abdul Latheef Abdul Latif Positive Spelling Variation

4 Madhuri Dixit Dixit Maduri Positive Interchange of first andlast name with a variation

5 Akarsha Gamage SamanmaliAkarsha Gamage

Positive Middle & surname match

6 Ravi S Kumara S Ravi Positive First Name Match

7 Suseel JayanthaBandara

Susil JayanthaBandara

Positive Spelling Variation

8 C Mary Mary C Arnorld Positive First Name Match

9 Donald Peiris Donald Perera False Only first name match

10 Jimy ThomasMathew

Jimmy Thomas Positive Spelling variation andmiddle name match

11 S Khan Salman Khan Positive Initials match

12 Naim Mohammed N Mohammed Positive Initials match

13 PurnachandralalPrasad G

P Gamage Prasad Positive Initials match

(examples are indicative & reference purpose only)


6.2 Match Score

Every match identified by the search engine has a score associated with it. Based onthe closeness of the match, the matching rule would arrive at the score of the match(Match Algorithm set through Compass AML system). Minimum value of the matchscore is 1 and the maximum score is 100. A match score of 100 indicates an exactmatch (Subjective).

As per Bank policy, it is recommended that matches 90% and above are to beconsidered when arriving at the conclusion. All such matches need to be shared withthe Financial Crime Compliance team in order to obtain Compliance clearance orfurther requisitions to be made as per Compliance recommendation.

6.3 Match Identifiers

Any one identifier is matched inclusive/apart from name. If any identifier/s as beloware matched, it is considered a true match & match score would be 90% and above.

Activity Type Identifier

Individual ▪ NIC/Passport No

▪ Driving License

▪ Date of Birth

▪ Age (as on)*

▪ Place of Birth

▪ City

▪ Nationality

Company/Organisation

▪ Address

▪ Country of incorporation/operation

Vessel ▪ IMO (Independent Marketing Organization) - Ship number **

▪ Flag

▪ Owner of the ship, Shipping agent

FundTransfers

▪ Bank Name (Beneficiary/Remitter)

▪ Country

▪ BIC Code


* Users may arrive at the current age with the indicated age as on effective date/year

** In cases where the vessel name is matched with an IMO number, Trade staff mustobtain IMO number from customer to validate same.


7.0 True matches against Politically Exposed Person’s (PEP) name

This category of customers known as PEPs and are required to be categorised asHIGH Risk from an AML Compliance perspective. However regulatory guidelines donot prohibit dealings with PEPs. But Enhanced Due Diligence (EDD) is required tobe carried out on such customers. This is to check and confirm whether the PEPMatch has negative information against the respective Individual. In all such eventspertaining to PEPs, the branch/business team need to obtain approval from CorporateManagement and the Compliance team if to proceed with the account relationship ornot.

Eg: PEP match

It is to be noted that a negative EDD of the PEP exposes the Bank to risks andtherefore it is recommended to decline the request in order to mitigate AML risks.However if the EDD is satisfactory, the branch/business team can proceed with thePEP classification subject to adequate Enhanced Due Diligence measures.

Please refer PEP Memorandum and Master Circular on Account Opening forPEP identification, classification and Enhanced Due Diligence measures for HighRisk Customers and Records Retention requirements respectively.


8.0 Name Screening Reviews

Any update effected in the existing customer names (I.e. Passport number, addresschange, PEP status etc) will be auto scanned against the WorldCheck1 database onreal time basis and subsequently a separate database will be generated in CompassAML System including internal changes effected to customer data in the CoreBanking System (CBS) on T+1 basis.

This database shall be checked by the Financial Crime Compliance (FCC) team on adaily basis and such True Matches, match score of >99% will be assessed fromAML/TF/Sanctions perspective. Accordingly, FCC team will instruct the relevantteams to conduct EDD/ revise risk rating or take action as deemed appropriate andrequired.

8.1 Name Match Reporting

A report on the Name Screening is done monthly with Statistics and shall be includedin the Compliance Report to be submitted to the Board.

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