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TRANSCRIPT
State Street
Customer Due Diligence Storyboard
State Street
Customer Due Diligence
State Street
Customer Due Diligence Storyboard
DOCUMENT HISTORY
Created/Revised By
Revision Details Created/Revised on Version No
Pooja Zaware Initial Draft November 14, 2014 0.1Shweta Mukherjee Client Feedback
ImplementationDecember 8, 2014 1.0
Vikas Salgaonkar Client Feedback Implementation
December 11, 2014 1.1
Vikas Salgaonkar Client Feedback Implementation
December 15, 2014 1.2
Shweta Mukherjee ID review December 17, 2014 1.3Shweta Mukherjee Client Feedback
ImplementationDecember 19, 2014 1.4
Pooja Zaware Client Feedback Implementation
December 22, 2014 1.5
Shweta Mukherjee Client Feedback Implementation
December 23, 2014 1.6
Shweta Mukherjee ID Review December 24, 2014 1.7Shweta Mukherjee QA Review December 25, 2014 1.8
Priya Tiwari Client Feedback Implementation
January 2, 2015 1.9
Vikas Salgaonkar Changes Verification January 5, 2015 2.0Vikas Salgaonkar Client Feedback
ImplementationJanuary 6, 2015 2.1
Vikas Salgaonkar Clean Version January 12, 2015 2.2Shweta Mukherjee QA Review January 12, 2015 2.3
Priya Tiwari Global Changes January 13, 2015 2.4Vikas Salgaonkar Changes Verification January 15, 2015 2.5Vikas Salgaonkar Changes Verification January 16, 2015 2.6
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Customer Due Diligence Storyboard
Vikas Salgaonkar Changes Verification January 16, 2015 2.7Shweta Mukherjee Client Feedback
ImplementationJanuary 19, 2015 2.8
Vikas Salgaonkar Updates screen 11: Source of Wealth
January 20, 2015 2.9
Vikas Salgaonkar Updates screen 11: Source of Wealth/19:
Record Retention
January 21, 2015 3.0
Priya Tiwari ID Review January 22, 2015 3.1Vikas Salgaonkar Proof Reading
ChangesJanuary 23, 2015 3.2
Shweta Mukherjee Client Feedback Implementation
January 27, 2015 3.3
Shweta Mukherjee Client Feedback Implementation
January 28, 2015 3.4
Vikas Salgaonkar Client Feedback Implementation
February 05, 2015 3.5
Vikas Salgaonkar Client Feedback Implementation
February 06, 2015 3.6
Shweta Mukherjee Client Feedback Implementation
February 09, 2015 3.7
Vikas Salgaonkar Client Feedback Implementation
February 11, 2015 3.8
Pooja Zaware Client Feedback Implementation
March 23, 2015 3.9
Shweta Mukherjee Client Feedback Implementation
April 24, 2015 4.0
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State Street
Customer Due Diligence Storyboard
What is a Storyboard? A storyboard or script is the preliminary version of detailed content and descriptions of the multimedia elements that will be integrated into the WBT course. What should you review?
Does the content meet the goals of the client training requirement? Is the information presented accurate? Does the flow of the content meet the instructional requirement? Do the graphics and animations illustrate the key learning points? Do the simulations and scenarios illustrate the key learning points? Does the text read appropriately?
How should you review or provide feedback?To activate the ‘Track Changes’ option in MS Word:
1. On the Review tab, click the Track Changes option in the Tracking section or2. Expand the Track Changes option3. Select Track Changes
In some of the version of MS Word, you can activate the Track Changes option by selecting it from the Tools menu.For content language review:
Onscreen text Transcript/voice-over text (VO)
For ID review: Onscreen text Graphic Descriptions Transcript/Voice Over Instructions for integration or development Other specifications
Module Name: Customer Due Diligence
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Slide Name: Course Objectives
Screen No: 01On-Screen Text Graphics DescriptionBy the end of this module, you will be able to:
Identify information required for Customer Due Diligence (CDD).
Explain the CDD Process. Explain the components of a customer’s activity profile. Identify the screening requirements. Perform screening on a customer. Explain the process of onboarding a Politically Exposed
Person (PEP). Assign a risk rating to the customer.
To continue, click Next.
Display the OST in progressive disclosure format.
141946057Display the above image in sync with text.The next button should be activated only when the entire OST is displayed.
Transcript
Interactivities
Course NavigationPrevious < NA Next > 02
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State Street
Customer Due Diligence Storyboard
Module Name: Customer Due Diligence
Slide Name: Know Your Customer
Screen No: 02
On-Screen Text Graphics DescriptionState Street is committed to comply with Anti-Money Laundering (AML) and Sanctions regulations, as implemented by the State Street AML and Sanctions Programs.
Know Your Customer (KYC) encompasses standards and procedures designed to ensure State Street knows with whom they are doing business.
Now that you have a better understanding of KYC, this module will provide detailed information related to the second component of KYC: CDD.
To continue, click Next.
Display the OST and the below logo
TranscriptNA
Interactivities
Course NavigationPrevious < 01 Next > 03
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Customer Due Diligence Storyboard
Module Name: Customer Due Diligence
Slide Name: Customer Due Diligence Overview
Screen No: 03On-Screen Text Graphics DescriptionCDD begins with the identification and verification of the customer’s identity.
The First Line of Defense assesses the AML and Sanctions risks associated with a customer by collecting and analyzing additional information and conducting name and country screenings. T1
After the customer’s identity has been verified, the First Line of Defense obtains information at account opening sufficient to develop an understanding of the customer’s normal and expected activity. The type and level of activity will be influenced by the customer’s:
Occupation Business Operations Financial Situation T2
To continue, click Next.
Display the OST and the image below on the screen.
Transcript
Interactivities
Course NavigationPrevious < 02 Next > 04
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Module Name: Customer Due Diligence
Slide Name: First Line of Defense Responsibilities
Screen No: 04
On-Screen Text Graphics Description
While conducting due diligence for new and existing customers, the First Line of Defense is responsible for obtaining and collecting customer information sufficient to: Anticipate the types of transactions a customer is likely to engage in. Provide information that can be used in monitoring and reporting of
suspicious activity. Assess the money laundering and terrorist financing risks associated with
a customer. Identify the following information about privately-held legal entities (other
than privately-held U.S. financial institutions (FIs)) with a Federal functional regulator:
o Whether the entity’s shares are held in bearer form.o Whether the entity is authorized to issue bearer shares, for
example, do the articles of incorporation contain a provision authorizing the issuance of bearer shares.
Note: The Business Unit ultimately owns the risk that the customer brings to State Street.
To continue, click Next.
Display the text and the image below on the screen in a progressive disclosure format.
Image ID: 201441119
Transcript NAInteractivitiesNA
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Course NavigationPrevious < 03 Next > 05
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Module Name: Customer Due Diligence
Slide Name: Knowledge Check
Screen No: 05
On-Screen Text Graphics Description
While conducting due diligence for new and existing customers, the _________ is/are responsible for obtaining and collecting customer information sufficient to anticipate the types of transactions a customer is likely to engage in.
A. First Line of Defense B. Second Line of Defense C. Third Line of Defense D. First, Second, and Third Lines of Defense
Select the correct option, and then click Submit.
Number of attempts: 1
Correct answer: A
Correct Feedback: That’s right! While conducting due diligence for new and existing customers, the First Line of Defense is responsible for obtaining and collecting customer information sufficient to anticipate the types of transactions a customer is likely to engage in.
Incorrect Feedback: That’s incorrect. While conducting due diligence for new and existing customers, the First Line of Defense is responsible for obtaining and collecting customer information sufficient to anticipate the types of transactions a customer is likely to engage in.
Animation Description
Course NavigationPrevious < 04 Next > 06
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CDD Storyboard
Module Name: Customer Due Diligence
Slide Name: Collection of Basic Customer Information
Screen No: 06
On-Screen Text Graphics DescriptionBefore the account opening process can be completed, the Business Unit must obtain information from customers to understand their background, needs, and AML and Sanctions risk level. (T1)
The Business Unit must obtain the following information: Country of formation/operations Type of business Products and services requested Legal entity structure
To continue, click Next.
Display T1 and the below image.
Image ID: 190620455
TranscriptNAInteractivities
Course Navigation Previous < 05 Next > 07
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CDD Storyboard
Module Name: Customer Due Diligence
Slide Name: Purpose of Account and Intended Use
Screen No: 07
On-Screen Text Graphics DescriptionFor the second step in CDD, the Business Unit must:
Gather information about the customer’s anticipated activity, products, and services to be utilized.
Ensure the information collected is commensurate with the risk associated with the products and services to be delivered and/or the customer segment.
Include details about the products and services being provided to the customer as well as the intended use of the products and services.
Complete the applicable CDD process requirements and include the customer’s intended use of the products and services as well as the customer segment in the customer’s profile to ensure that the appropriate CDD information is captured and that it clearly evidences the CDD process.
To continue, click Next.
Display the lead-in and the bullets in a similar template displayed below.
TranscriptNAInteractivitiesNACourse Navigation06 < Previous Next > 8
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Customer Account Profile
Acceptable Customers
State Street
CDD Storyboard
Module Name: Customer Due Diligence
Slide Name: Anticipated Account Activity
Screen No: 08
On-Screen Text Graphics DescriptionThe Business Unit must collect information to document the anticipated account activity, source of funds, and source of wealth. (T1)
To learn more about the Customer’s Account Profile and Acceptable Customers, click each icon below.
To continue, click Next.
Display T1 and the instruction following it on the screen.
Then display the icons for Customer Account Profile and Acceptable Customers.
Customer Account Profile Image ID: 229570111Acceptable Customers Image ID: 117398188
On clicking each icon, display respective text and images in a pop-up.
On closing the pop-up, direct the user to the main screen.
Images for pop-ups:Customer Account Profile Image ID: 226399279
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Acceptable Customers Image ID: 123579487
TranscriptNAInteractivitiesDisplay icons for Customer Account Profile and Acceptable Customers.
Text for pop-ups:Customer Account Profile:A customer’s account profile should reflect higher risk activity that is expected in the customer’s account.
Transactions that are not routine, such as a one-time transaction as a result of the sale of a property or a loan disbursement, should be considered when determining the expected profile in the customer’s account, if the customer expects such a transaction to flow through the account.
High-risk transactions must be documented as part of the customer profile and are a factor in determining the AML Customer Risk Rating (CRR). High-risk transactions can include international wires to/from high-risk jurisdictions or international ACH transactions (IAT).
Acceptable Customers:The Business Unit must accept only those customers whose source of funds and source of wealth can be reasonably established as legitimate.
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In the case of Ultimate Beneficial Owner (UBO), it may be necessary to establish the ultimate source of funds for the account and whose source of wealth should be subject to due diligence.
The KYC Requirements Matrix provides information about the relevant documentation that needs to be collected per category.
When the user clicks next without clicking all the icons, show the following pop-up:
You must visit all information related to Customer Account Profile and Acceptable Customers before proceeding.
Display a check mark next to the icon that a user has accessed.
Course Navigation07 < Previous Next > 9
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CDD Storyboard
Module Name: Customer Due Diligence
Slide Name: Source of Funds
Screen No: 09
On-Screen Text Graphics DescriptionThe Business Unit must take adequate measures to establish the source of funds that are involved in the proposed relationship or occasional transaction.
This is not simply the name of the FI from where the funds are coming, but rather it is the source from which the customer came into possession of the funds.
Identification of the source of funds contributes to the source of wealth for the customer.
To continue, click Next.
Display the OST in a progressive disclosure format and the image below.
Image ID: 122772919
TranscriptNAInteractivitiesNACourse Navigation08 < Previous Next > 10
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Individuals Documents/Transac
tions
Non-Individuals Documents/Transactio
ns
State Street
CDD Storyboard
Module Name: Customer Due Diligence
Slide Name: Examples of Source of Funds
Screen No: 10
On-Screen Text Graphics DescriptionCertain documents and transactions can validate the source of funds for a customer. (T1)
To learn more about Non-Individuals Documents/Transactions and Individuals Documents/Transactions that helps identify source of funds, click each image below.
To continue, click Next.
Display T1 and the instruction following it on the screen.
Then display images for Non-Individuals Documents/Transactions and Individuals Documents/Transactions.
Non-Individuals Documents/Transactions Image ID: 141032806Individuals Documents/Transactions Image ID: 225600154
On clicking each image, display respective text and images in a pop-up.
On closing the pop-up, direct the user to the main screen.
Images for Pop-ups:Non-Individuals Documents/Transactions Image ID: 141032806Individuals Documents/Transactions Image ID: 225600154
Transcript17
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CDD Storyboard
NAInteractivitiesDisplay images for Non-Individuals Documents/Transactions and Individuals Documents/Transactions.Text for pop-ups:Non-Individuals Documents/Transactions
Examples of documents that can validate source of funds for Non-Individuals are: Insurance payout Payroll 401K Gift Trust Internet payments Domestic wire transfers Monetary instruments Cash deposits of foreign currency Cash deposits of local currency Foreign wire transfers Third-party check
The customer’s source of funds can be in the form of initial/event driven and/or continuous transactions.
Examples of a customer’s source of funds for Non-Individuals are: Unique Transactions:
o Grant funding received from the federal government to fund solar power transformation project. o Tax rebate received from the state government as part of a special agreement for job creation.
Continuous Transactions:o Revenue from business operations and business investments in bonds.
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o Credit card receivables for products and services provided to customers.
Individuals Documents/Transactions
Examples of documents that can validate source of funds for Individuals are: Insurance payout Payroll 401K Gift Trust Internet payments Domestic wire transfers Monetary instruments Cash deposits of foreign currency Cash deposits of local currency Foreign wire transfers Third-party check
The customer’s source of funds can be in the form of initial/event driven and/or continuous transactions.
Examples of a customer’s source of funds for Individuals are: Unique Transactions:
o Settlement received from an insurance company and looking to invest the funds for future use.o Proceeds from a bank account recently closed and used to open the same/similar type of account.o Inheritance received from a family member which will be a one-time event.
Continuous Transactions:o Payroll deposits made into the account on a periodic basis, weekly, biweekly, or monthly.o Pension or annuity payments made into the account on a monthly basis after retiring.
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o Revenue received from a small business owned and operated by the Individual.
When the user clicks next without clicking all the images, show the following pop-up:
You must visit all information related to Non-Individuals Documents/Transactions and Individuals Documents/Transactions that helps identify source of funds before proceeding.
Display a check mark next to the image that a user has accessed.
Course Navigation09 < Previous Next > 11
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CDD Storyboard
Module Name: Customer Due Diligence
Slide Name: Source of Wealth
Screen No: 11
On-Screen Text Graphics DescriptionTo evaluate the source of a customer’s wealth, the Business Unit should gather information relevant to the manner in which the customer’s assets are obtained.
This is the accumulation of the customer’s net worth that includes, in part, the funds held by State Street.
Display the OST with the image below.
Image ID: 157029593
The Business unit must consider various factors to determine the customer’s source of wealth.
Display the OST and the image below.
Image ID: 174036335
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Customer Type Nature of the Business
Source of Wealth Overall Justification Statement
State Street
CDD Storyboard
To learn more about the factors affecting the customer’s source of wealth, click each icon below.
These factors work together to tell a story about the customer’s source of wealth.
For example, the information collected by the Business Unit may differ depending on whether the wealth is acquired through: Investments Investment returns Ownership of a business Employment Professional practice
To continue, click Next.TranscriptNAInteractivitiesContent for interactivity:Display four tabs: Customer Type
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Nature of the Business Source of wealth Overall Justification Statement
Customer typeThis begins the KYC process defining the requirements for each customer type.
Identification of the customer type offers immediate, inherent information related to the customer itself. For example, if the customer is an open-ended mutual fund, it can be assumed that the fund has many investors that participate or contribute to the fund, and that the assets are from the investors.
Nature of the Business
The nature of business has a risk rating associated with it and is essential information to understand the customer, and their operations and the reasonableness of the source of wealth.
The type of business in which the customer engages can be found through the SIC/NAICS/NACE codes. The industry that fits best for an open-ended mutual fund is 525910 – Open-End Investment Funds. Source of Wealth
The source of wealth requirement states: Verify from the customer the source of wealth. (This is not simply the name of the institution from which the funds are coming, but the accumulation of the customer’s net worth, which includes, in part, the funds held by State Street).
Following the open-ended mutual fund example, given that the fund has many investors and is a vehicle to make investments and returns for its investors, the option shown below fits best to reflect the source of wealth for the fund.The various source of wealth are: Operations
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Fees Investments Revenue Dividend payment Investment returns Business operations Inheritance Wages/Salary Sale of Real Estate Lottery Divorce settlement Retirement income Fixed deposit savings
Overall Justification Statement
The source of wealth takes a number of factors into consideration. An assessment must be conducted utilizing the information collected from previous requirements during KYC.
Factors contributing to the source of wealth's accuracy and reasonableness include: From where the funds came How the client acquired the funds From whom, if received from another individual, or entity When the funds were acquired The location(s) from where the funds cameThe above parameters, combined with the industry, customer type, and the source of funds over time lead to a narrative regarding the source of wealth. For example, an Investment Manager recently brought in a Mutual Fund, which is an open-ended investment fund (525910), with thousands of investors, and is targeted for long term investment returns. (This leads one to assess that a mutual fund that accepts a large amount of capital from investors to grow the investment returns is
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CDD Storyboard
reasonable. This source of wealth is justified as one can expect that operations, fees, investments, and earnings contribute to the source of wealth, and the immediate source of funds is directly attributable to investments from new shareholders).
When the user clicks next without clicking all the images, show the following pop-up:
“You must visit all information related to the factors affecting the customer’s source of wealth before proceeding.”
Display a check mark next to the image that a user has accessed.
Course Navigation 10 < Previous Next > 12
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Individuals Documents/Transactions
Non-Individuals Documents/Transactions
State Street
CDD Storyboard
Module Name: Customer Due Diligence
Slide Name: Examples of Source of Wealth
Screen No: 12
On-Screen Text Graphics DescriptionCertain documents and transactions can validate the source of wealth for a customer. (T1)To learn more about Non-Individuals Documents/Transactions and Individuals Documents/Transactions that help identify source of wealth, click each image below.
To continue, click Next.
Display T1 and the instruction following it on the screen.
Then display images for Non-Individuals Documents/Transactions and Individuals Documents/Transactions.
Non-Individuals Documents/Transactions Image ID: 141032806Individuals Documents/Transactions Image ID: 225600154
On clicking each image, display respective text and images in a pop-up.
On closing the pop-up, direct the user to the main screen.
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Images for Pop-ups:Non-Individuals Documents/Transactions Image ID: 141032806Individuals Documents/Transactions Image ID: 225600154
TranscriptNAInteractivitiesDisplay images for Non-Individuals Documents/Transactions and Individuals Documents/Transactions.
Text for pop-ups:Non-Individuals Documents/Transactions
If documentation is required to establish or support an assessment of the source of wealth, the following lists of documents can assist in validating the source of wealth for a customer.
Non-individual: Prospectus Annual reports Key investor information document Letter/contract note from previous investment company giving notification of proceeds of maturing investment/claim Signed tax return from a certified accountant Completed sale contract Loan agreement Recent loan statements Letter from donor confirming details of gift and acknowledging the source of the donated funds Legal sale document(s) (such as contract notes) Signed letter from an Attorney
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Signed letter from a certified accountant
The customer’s source of wealth can be in the form of a one-time event and/or continuous transactions over time.
Examples of transactions for Non-Individuals are: Investments from new subscribers in a fund and earnings from the investment of subscriber funds. Investment returns from joint business ventures with well-known FIs and other non-bank FIs. Sale of an insurance company’s stock over a period of time to reduce the overall risk exposure of the company. Private company in the insurance industry recently sold its office buildings as part of their plan to consolidate business
operations to stay within the U.S. Public company in the non-bank financial services industry recently had their initial public offering/stock market launch to
institutional investors to raise capital to make an acquisition of a competitor for increased market share.
Individuals Documents/Transactions
If documentation is required to establish or support an assessment of the source of wealth, the following lists of documents can assist in validating the source of wealth for a customer.
Examples of documents that can validate the source of wealth for Individuals are: Last three months’ pay slips Confirmation from the employer of the income and bonuses for last two years Bank statements that clearly show receipt of the most recent three months’ regular salary payments from the named employer Latest accounts, if self-employed Grant of Probate with a copy of the will that must include the value of the estate Loan agreement Recent loan statements Bank statements Letter from a donor confirming details of gift and acknowledging the source of the donated funds
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CDD Storyboard
The customer’s source of wealth can be in the form of a one-time event and/or continuous transactions over time.
Examples of transactions for Individuals are: Divorce settlement received that was used to fund the new account Annual bonus received from the individual's current employer Dividends received from stock held in a brokerage account on a quarterly basis Alimony payments received on a monthly basis
When the user clicks next without clicking all the images, show the following pop-up:
You must visit all information related to Non-Individuals Documents/Transactions and Individuals Documents/Transactions that help identify source of wealth before proceeding.
Display a check mark next to the image that a user has accessed.
Course Navigation11 < Previous Next > 13
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Module Name: Customer Due Diligence
Slide Name: Screenings
Screen No: 13
On-Screen Text Graphics DescriptionThe third step in CDD is when KYC Shared Services conducts screenings on the names and countries associated with customers, nominal or UBOs, related and specified controlling parties, and associated third parties prior to opening the customer’s account. (T1)
Screenings consist of the following searches: Global, Local, and State Street Sanctions Lists World Check Iran Economic Interest Database (IEI Database) AML Compliance Counterparty Watch List Negative News Search (through World Check or another vendor) PEP Financial Crimes Enforcement Network (FinCEN) Section 311 Special Measures
State Street will NOT enter into a relationship with prohibited Non-Individuals or Individuals with an exact screenings match to the SDN, FinCEN 311 Special Measures List, and the Iran Economic Interest Database.
To learn more about Sanctions, Negative News, FinCEN Section 311 Special Measures, and PEP, click each icon below.
Display T1 and the instruction following it on the screen.
Sanctions Image ID: 186435920Negative News Image ID: 67464253FinCEN Section 311 Special Measures Image ID:
PEP Image ID: 153531818
On clicking each image, display respective text and images in a pop-up.
On closing the pop-up, direct the user to the main screen. Images for pop-ups:Sanctions Image ID: 85858207
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Sanctions Negative News
FinCEN Section 311 Special Measures
PEP
State Street
CDD Storyboard
To continue, click Next.
FinCEN Section 311 Special Measures Image ID: 160387376
PEP image ID: 139825753
Create interactivity within Negative news. Display below images with labels as ‘Relevant Negative News’ and ‘Non-relevant Negative News.’
On clicking each image, display respective text in a pop-up.
On closing the pop-up, direct the user to the main screen.
Relevant Negative news Image ID: 31
State Street
CDD Storyboard
226202944
Non-Relevant Negative News Image ID: 128856874
If certain jurisdictions/governments require additional lists to be screened for known or suspected terrorists, the non-US BU AMLO/MLRO must notify the impacted Business Unit, KYC Shared Services, OFAC/Sanctions Central Monitoring (OSCM) and Global Chief AML Officer to amend screening procedures accordingly.
After performing the screenings, KYC Shared Services should review: All potential and partial search results. Each potential match to determine whether the results are false positives or
confirmed matches.
TranscriptNAInteractivities
Display the following images and when user clicks an image, display relevant text:
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1. Sanctions2. Negative News3. FinCEN Section 311 Special Measures4. PEP
Text for pop-ups:
Sanctions
At customer onboarding, names and countries of all customers, UBOs and any other related and specified controlling parties, and associated third parties must be screened for Sanctions purposes using the following lists: Global, Local, and State Street Sanctions Lists World Check IEI Database AML Compliance Counterparty Watch List
OnboardingCustomer names and countries related to Sanctions are currently scanned by the Office of Foreign Assets Control (OFAC)/Sanctions Central Monitoring and any potential matches must be reviewed by the Business Unit.
Ongoing Customer RelationshipThe OFAC/Sanctions Central Monitoring reviews all potential matches from the Ongoing Customer Screening and requests additional information from the Business Unit when needed to complete their review.
Negative News
All customers, UBOs and any other related and specified controlling parties, and associated third parties must be screened for negative news items, and once analyzed, should be designated as relevant or non-relevant.
Negative news can be classified as relevant negative news and non-relevant negative news.
To learn more about Relevant Negative News and Non-Relevant Negative News, click each image below.
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Relevant Negative
News
Non-Relevant Negative News
State Street
CDD Storyboard
Relevant Negative News
Not all negative news is relevant, i.e., would be relevant to the decision whether the customer poses a High-risk.
Generally, only negative information that reflects the reputation of the customer for legal or regulatory compliance is relevant, such as: Criminal or regulatory enforcement actions Money laundering or Sanctions violations Other illegal activity that was conducted by or facilitated by the customer
Negative financial news or information about litigation with customers or competitors also generally is not relevant. Crimes committed against the customer generally may not be relevant, such as embezzlement or traffic violation. If there is any doubt whether negative news is relevant, the Business Unit AML Officer must be consulted.
In the case of a confirmed match and materiality, the First Line of Defense will contact the Business Unit AML Officer and AML Compliance Financial Intelligence Unit (FIU) on the same day the negative news is identified.
Non-Relevant Negative NewsNon-relevant negative news largely pertains to less significant instances of the activities described previously. The offenses are typically isolated and/or minor in nature.
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Non-relevant negative news corresponds to incidents that reflect no significant reputational, legal, or financial impact on the customer.
It should be noted that, multiple instances of a non-relevant behavior that appear to suggest control issues for a Non-Individual or an Individual may collectively be interpreted as relevant.
For developer: Display below text with table when learner visits both pop-ups.
Relevant and non-relevant negative news listed below include but are not limited to a customer’s and/or related party’s established or reasonably substantiated connections with:
Relevant Negative News Non-Relevant Negative NewsTerrorist activity related to AML Misdemeanor criminal convictions or
judgmentsAML and Sanctions non-compliance Unremarkable civil awards, settlements
or penaltiesViolations of AML laws, regulations or sanctions
Insignificant or extraneous litigation
Drug-related offenses due to cash intensive nature increases AML Risk
Rogue employee actions
Fraud related to AML Actions by former members of senior management
Bribery related to AML (especially relevant for PEPs)
Actions by more junior employees
Interactivity after the information is presented.Questions should appear once user clicks both the icons.
First Question:
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XXX Bank has been fined three times since 2008, in each circumstance for internal control failures that allowed employees to divert, misappropriate or embezzle funds. The fines ranged in amount from $2 million to the most recent fine levied in 2010 of $5 million. The fines also came with orders to dismiss the employees engaging in the misconduct.
The situation presented above is an example of ____________.
Select the correct option, and then click Submit.
A. Relevant Negative NewsB. Non-Relevant Negative News
Correct Response: A
Correct Feedback: That’s right! Relevant Negative News is correct because the fines levied against the bank were related to failures of internal controls that allowed the diversion, misappropriation and/or embezzlement of funds. These internal control failures would suggest that the bank is susceptible to money laundering and other illegal activities.
Incorrect Feedback: That’s incorrect. Non-Relevant Negative News is incorrect because the fines levied against the bank are related to failures of internal controls that allowed the diversion, misappropriation and/or embezzlement of funds. These internal control failures suggest that the bank is susceptible to money laundering and other illegal activities.
Second Question:
Results for XXX Bank shows a violation (funds transfer) made on November 2003, the penalty has been settled because of a voluntary disclose penalty of $2,684.
The situation presented above is an example of ____________.
Select the correct option, and then click Submit.
A. Relevant Negative NewsB. Non-Relevant Negative News
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Correct Response: B
Correct Feedback: That’s right! Non-Relevant Negative News is correct because regulators acknowledge that a single isolated incident risk does not necessarily invalidate the integrity of a bank’s AML/CFT controls. Here, the example does not suggest that the violation was a systemic issue resulting from deficient internal controls and, therefore, would be deemed Non-Relevant Negative News.
Incorrect Feedback: That’s incorrect. Relevant Negative News is incorrect because the example is an isolated incident and does not suggest that the violation was a systemic issue resulting from deficient internal controls.
Third Question:
Research on XXX Organization found numerous violations in recent years related to control failures that allowed employees to misappropriate customer funds. In July of 2008 XXX, Bank was fined $4 million by ##### for internal control failures that allowed two employees to misappropriate more than $100 million in total. In January of 2009, it was again fined $2 million by ##### for internal control failures that allowed an employee to divert customer funds for their own purposes. Recently in May 2010, another fine of $5 million by ##### for internal control failures that allowed an employee to embezzle $80 million. Through this activity, XXX Organization demonstrated a blatant disregard for protecting itself. Partnering with XXX Organization could open up State Street to unmitigated risks based on the customers that XXX Organization may be likely to do business with and the product set available to XXX Organization’s customers through State Street.
The situation presented above is an example of ____________.
Select the correct option, and then click Submit.
A. Relevant Negative NewsB. Non-Relevant Negative News
Correct Response: A
Correct Feedback: That’s right! Relevant Negative News is correct because the numerous violations and citations by ##### for 37
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internal control failures suggests that XXX Organization has systemic AML deficiencies.
Incorrect Feedback: That’s incorrect. Non-Relevant Negative News is incorrect because the numerous violations and citations by ##### for internal control failures are relevant and suggest that XXX Organization has systemic AML deficiencies.
Fourth Question:
XXX Bank was also found listed for a violation of the Banking Regulation Act 1949 with a monetary penalty of Rs 500,000 (Rupees) in June 2006 and paid in May 2007. (Conversion is roughly $10,000). The situation presented above is an example of ____________.
Select the correct option, and then click Submit.
A. Relevant Negative NewsB. Non-Relevant Negative News
Correct Response: B
Correct Feedback: That’s right! Non-Relevant Negative News is correct because the settlement is unremarkable and the example is an isolated incident, not suggestive of systemic AML program deficiencies. Regulators acknowledge that a single isolated incident risk does not necessarily invalidate the integrity of a bank’s AML/CFT controls.
Incorrect Feedback: That’s incorrect. Relevant Negative News is incorrect because the settlement is unremarkable and the example is an isolated incident, not suggestive of systemic AML program deficiencies.
Fifth Question:
XXX Bank was found to have been fined by the #### for failures in relation to fund sales in January 2011. In August 2010, XXX Bank agreed to forfeit $298 million to settle criminal charges of violating USA financial sanctions against multiple countries from 1995 to 2006 and agreed to a Cease and Desist order issued by **** for improvements in its program for compliance with U.S. economic sanctions requirements on a global basis.
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The situation presented above is an example of ____________.
Select the correct option, and then click Submit.
A. Relevant Negative NewsB. Non-Relevant Negative News
Correct Response: A
Correct Feedback: That’s right! Relevant Negative News is correct because the 2011 fine and the 2010 forfeiture considered collectively suggest deficient AML controls, which is relevant.
Incorrect Feedback: That’s incorrect. Non-Relevant Negative News is incorrect because the 2011 fine and the 2010 forfeiture considered collectively suggest deficient AML controls.
Sixth Question:
A Massachusetts man, who is a customer of State Street, was charged Friday with driving while under the influence after police saw him travelling nearly 30 mph over the speed limit on East Putnam Avenue. Once police caught up with the man, identified as XXX, they detected the odor of alcohol in his car. He later failed a series of field sobriety tests. XXX was released on $250 bond.
The situation presented above is an example of ____________.
Select the correct option, and then click Submit.
A. Relevant Negative NewsB. Non-Relevant Negative News
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Correct Response: B
Correct Feedback: That’s right! Non-Relevant Negative News is correct because the nature of the offense is unrelated to the integrity of the customer regarding legal or regulatory compliance.
Incorrect Feedback: That’s incorrect. Relevant Negative News is incorrect because the nature of the offense is unrelated to the integrity of the customer regarding legal or regulatory compliance and, therefore, not relevant.
When the user clicks next without clicking all the icons, show the following pop-up:
You must visit all information related to Relevant Negative News and Non-Relevant Negative News before proceeding.
Display a check mark next to the icon that a user has accessed.
FinCEN Section 311 Special MeasuresSection 311 of the USA PATRIOT Act (Section 311) grants the Secretary of the Treasury the authority, upon finding that reasonable grounds exist for concluding that a foreign jurisdiction, foreign FI, class of transaction, or type of account is of “primary money laundering concern,” to require domestic FIs and financial agencies (e.g., banks) to take certain “special measures” against the entity identified as a primary money laundering concern.
These special measures, which may be proposed and implemented by Treasury's FinCEN, range from requiring additional due diligence and special attention concerning particular account transactions among U.S. FIs to prohibiting the opening or maintenance of any correspondent or payable through accounts.
The following special measures can be imposed individually, jointly, in any combination and in any sequence: Recordkeeping on and reporting of certain transactions Collection of information relating to beneficial ownership Collection of information relating to certain correspondent accounts Collection of information relating to certain payable-through accounts
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Prohibition or conditions on the opening or maintaining of correspondent or payable-through accounts
PEPState Street is required to identify customers, and nominal or UBOs, who are PEPs. PEPs may generally be viewed as High-risk.
A PEP is defined as: A current or former:
o Senior official (i.e., individual with substantial authority over policy, operations, or use of government-owned resources) in the executive, legislative, administrative, military, or judicial branches of a foreign government whether elected or not
o Senior official of a major foreign political partyo Senior executive of a foreign government-owned commercial enterprise
A corporation, business, or other entity that has been formed by, or for the benefit of, any such Individual A corporation, business, or other entity whereby more than fifty percent (%) of the board members or ownership rights are
(controlled by) such individual(s) An immediate family member of any such individual (i.e., spouse, parent, sibling, children, or spouse’s parents and siblings) A person who is widely and publicly known (or actually known by State Street) to be a close associate of such individual, i.e.,
senior level advisorNote: The term PEP refers to foreign and domestic Non-Individuals/Individuals.
PEP Customer Onboarding
The First Line of Defense is responsible for ensuring that State Street do not knowingly or unwittingly assist in hiding or moving funds that represent the proceeds of corruption by PEPs. AML Compliance is responsible for monitoring the effectiveness of the control environment around PEPs across the AML and Sanctions Programs.
After a PEP is identified through the CDD process, the First Line of Defense should collect specific CDD information or documentation related to the PEP and assess the associated AML risk.
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In determining the level of risk, the First Line of Defense may consider factors such as: Official duties of the individual Nature of the title (e.g., honorary or salaried) Level of authority over government activities or other government officials Access to significant government assets or funds Control over the account Negative news or other reports
When the user clicks next without clicking all the icons, show the following pop-up:
You must visit all information related to Sanctions, Negative News, FinCEN Section 311 Special Measures, and PEP before proceeding.
Display a check mark next to the icon that a user has accessed.
Course Navigation12 < Previous Next > 14
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Module Name: Customer Due Diligence
Slide Name: Assigning the Customer Risk Rating
Screen No: 14
On-Screen Text Graphics DescriptionAfter all of the necessary information has been obtained from the Business Unit, KYC Shared Services risk rates the customer using the Customer Risk Rating (CRR) Methodology. This allows State Street to assess the AML risk of conducting business with the customer and determine risk mitigating strategies prior to opening the customer’s account.
Display the OST and the below image.
The AML CRR: Drives decisions to initiate, maintain, limit, or terminate particular customer
relationships. Triggers approval requirements for KYC and exception processes. Effectively monitors High-risk customers by resource devotion. Determines the frequency of periodic reviews. Allows for the application of different levels and aspects of surveillance, including
transaction monitoring.
The KYC Shared Services classifies the customers as High, Medium, or Low based on the AML CRR scoring methodology and documents this score in the customer’s profile.
To continue, click Next.TranscriptNAInteractivitiesNACourse Navigation13 < Previous Next > 15
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Module Name: Customer Due Diligence
Slide Name: Knowledge Check
Screen No: 15
On-Screen Text Graphics DescriptionWhen should the First Line of Defense conduct screening on the customer, all UBOs, and on any other related and specified controlling parties, and associated third parties?
A. Prior to opening an accountB. After the account is openedC. While gathering customer informationD. At the time of requesting information
Select the correct option, and then click Submit.
Number of attempts: 1
Correct answers: A
Correct Feedback: That’s right! The First Line of Defense should conduct screening on the customer, all UBOs, and on any other related and specified controlling parties, and associated third parties prior to opening the customer’s account.
Incorrect Feedback: That’s incorrect. The First Line of Defense should conduct screening on the customer, all UBOs, and on any other related and specified controlling parties, and associated third parties prior to opening the customer’s account.
Animation DescriptionNA
Course Navigation14 < Previous Next > 16
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Module Name: Customer Due DiligenceSlide Name: Record RetentionScreen No: 16On-Screen Text Graphics Description
As a requirement, all customer facing businesses, support functions, and control functions must maintain records of a customer’s identity, transactions, and other significant records.
This ensures that legal and regulatory requirements in the jurisdictions in which it operates are met thereby ensuring confidentiality, bank secrecy, and data protection.
AML records must be maintained for a minimum of five years (from the end of the customer relationship in the case of identity records) or longer, if local regulation requires.
For European Union (EU) purposes, all non-transactional account records must be retained for five years from cessation of relationship, and transactional records for five years from the conclusion of the transaction.
Records must be stored to facilitate adequate access and retrieval in a timely manner.
To continue, click Next.
Use the following image with the text on this screen:
Image ID: 44389684
Interactivities
Course NavigationPrevious < 15 Next > 17
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Module Name: Customer Due Diligence
Slide Name: Module Summary
Screen No: 17
On-Screen Text Graphics DescriptionImportant points covered in this module:
KYC encompasses standards and procedures designed to ensure State Street knows with whom they are doing business.
CDD begins with the identification and verification of the customer’s identity.
While conducting due diligence for new and existing customers, the First Line of Defense is responsible for obtaining and collecting customer information.
Before the customer’s account opening process is complete, the Business Unit must obtain information from a customer to understand the customer’s background, needs, and AML and Sanctions risk level.
The Business Unit must collect information to document the anticipated account activity, source of funds and source of wealth for a customer.
Identification of the source of funds contributes to the source of wealth for the customer.
To evaluate the source of a customer’s wealth, the Business Unit should gather information relevant to the manner in which the customer’s assets are obtained.
KYC Shared Services conducts screenings on the names and countries associated with customers, all UBOs, and any other related and specified controlling parties, and associated third parties prior to opening the customer’s account.
After all of the necessary information has been obtained from the
Display the bullet points in progressive disclosure format.
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Business Unit, KYC Shared Services risk rates the customer using the CRR Methodology.
AML records must be maintained for a minimum of five years, from the end of the customer relationship in the case of identity records or longer, if local regulation requires.
TranscriptNAInteractivities NACourse Navigation16 < Previous Next > 18
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Module Name: Customer Due Diligence (CDD)
Slide Name:
Screen No: 18
On-Screen Text Graphics DescriptionThe next module in the KYC series focuses on Enhanced Due Diligence (EDD). EDD provides for a closer review of higher-risk customers.
To get familiar with EDD, please proceed to Module 4: Enhanced Due Diligence.
Display KYC logo with the text.
Highlight the EDD logo. TranscriptNAInteractivities NACourse Navigation17 < Previous Next > NA
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