Tackling financial crime

Money laundering and terrorist financing

Criminals launder money to disguise and conceal the proceeds of crime; terrorists hide the intended purpose of funds. In 2008, we took further steps to fight money laundering and terrorist financing by implementing the recommendations of an independent review carried out in 2007.

Strategy

We defined an enhanced Group strategy to manage money laundering risks in June 2008 and we are now introducing it to our businesses. The strategy combines:

  • Policy principles that set best practice
  • Risk assessment to target hot spots and focus our effort
  • Business-level strategies to enhance controls in the business

Tackling financial crime is a moving target and we recognise the need for continuous development as criminals adopt new tactics and as governments and financial institutions identify new defences. We have established minimum AML standards across the Bank, meeting the requirements of the 2007 UK Money Laundering Regulations.

Avoiding criminal accounts

In 2008, we redesigned the process for accepting new customers. We refined our Customer Due Diligence procedures for Wholesale and Consumer Banking, and introduced specific procedures for the Standard Chartered Private Bank. We believe we now have the right approach in all our businesses to concentrate attention on the areas of highest risk.

In support of these procedures we have upgraded our systems to identify higher risk customers. We use sophisticated systems to screen all new customers, and to rescreen our entire account database on a regular basis, against international sanctions lists.

We have also reviewed our risk assessment approach and developed a new way of monitoring individual countries’ AML risk. We ensure our analysis is independent by subscribing to an external database developed by Promontory Financial, which provides up-to-date geographic risk data and country rankings.

Identifying suspicious transactions

The Norkom Transaction Monitoring system analyses transactions to identify suspicious items or patterns. In 2008, we introduced it in the UAE, Germany, Japan, Thailand and China, and to the integrated American Express Bank operations in the US, Singapore and Hong Kong. Norkom is now installed in 13 countries covering most of our largest markets, and we are implementing a locally developed alternative in SC First Bank, Korea.

In the future, we expect to broaden the use of Norkom and make its detection capabilities more responsive to the ever-changing money laundering threat.

We also continually update and improve our systems for the screening of international payments traffic. These systems help us to detect and avoid transactions prohibited by international sanctions.

Educating staff

Compliance officers in all our markets are trained on our risk-based approach to AML so that our best practices are disseminated into all of our markets. We will introduce new Group-wide AML training in multiple languages in 2009, including specialist training in higher risk areas of the business.

We will also use an internal programme to certify money laundering prevention officers in 2009 to further improve their skills and awareness.

Suspicious Activity Reports – SARS

 Transaction monitoring

During 2008, as part of our transaction monitoring and suspicious activity reporting (SAR) process, we piloted in New York a programme to combat child pornography.

The programme used the Norkom system to filter and store data on entities suspected of links to child pornography or human trafficking and we provided advanced training to investigators on developing cases related to these crimes. Already, the programme has resulted in two reports to the relevant authorities.

We are now introducing the programme to other countries that use the Norkom system. We trained a further 41 investigators covering non-US markets and will add to this total during 2009.

 

Highlights

  • Launched a refreshed Group Code of Conduct which includes anti-corruption training
  • 12,000staff able to screen new accounts
  • 640 per centincrease in internet fraud incidents investigated