Anti-Money Laundering

Anti-Money Laundering
Platform

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The purpose of this document is to describe feature Lists concerning Anti-Money
Laundering (AML) Management. The document presents the set of the possibilities the standard
AML module Management features.

Introduction

The AML module is could be managed and accessed through Loanance web portal as a separate
section. AML Module leverages the following main functionalities:

1. Automated identification and blocking of customers who matches the AML criteria
2. Notifying the AML and Fraud management team
3. Sanction Lists Import with the appropriate result report / Export file with Lists of
blocked customers based on Sanction Lists
4. Manual Search Dashboard
5. Standard AML and Monitoring Report
6. Monitoring Scheduler Management
7. Result Dashboard (Dashboard with results from Matching Process as online alert/pop-
up -identify match as true or false)

The purpose of the AML Module is to identify customers, which have matched with persons
in Sanction Lists. The process is to import different official or custom created Lists with such
persons and then scan customers towards them (existing customers or during customer
onboarding).
Global AML standards refer to the FATF recommendations, which state that it is mandatory
to check customers, if this organization is subject to AML. Match algorithms is widely used in
software companies providing solutions for the AML platform.
Once a customer is identified and the match level is in the configured limits (values are
customizable), then the system will automatically block the customer, and notify the relevant
AML or Fraud monitoring team should be sent to the AML/ Fraud/ Monitoring Officer for
further verification and blocked customer(s) appears in respective reports. If the match will be
confirmed, AML/ Fraud/ Monitoring Officer should confirm by pressing the "True" button, if
will not be confirmed, Customer should be missed by pressing "False" button.

As well as during the initial registration of the Customer through Loanance system, Customer
should be scanned with Sanctions Lists. If they match, for example, customer(s) data on the last
name, first name, middle name, date of birth and on other available data from the system has a
match with a person from the Sanctions Lists (the percentage of matching is configurable), a
notification is also should be sent to AML/ Monitoring Officer, and the system will not allow the
Customer to register, displaying the error. If the match will be confirmed, AML/ Fraud/
Monitoring Officer should confirm by pressing the "True" button, if will not be confirmed,
Customer should be missed by pressing "False" button.

1. Sanction Lists Import

Sanctions List is a list with certain individuals, entities, and countries to fight against
financial crime. Governments maintain a Sanction List across the globe to prohibit business
transactions with such individuals, entities, and countries. Such individuals and entities are added
to the sanction list for various reasons, including terrorism, war crimes, and the proliferation of
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weapons of mass destruction. Sanction List meaning in simplest terms is, a publicly listed
directory of entities and individuals upon whom economic or legal restrictions have been
imposed.

Sanction Lists Creation:

1. Manual Screening - prepared file with required data, to be done based on a

configurable template. To create a template, fields from below template should be
chosen for Individuals and Entities:

Individual is any real person acting as a subject of civil law.

Entity is any company or organization that has legal rights and responsibilities, including tax
filings.

*Add file - an option in Manual upload, where multiple files can be uploaded at the same time
(for example, up to 5 files). Clicking this button, the same screen will be displayed for uploading
new files.

2. Automated Screening - used official specified links as UN, OFAC, Dow Jones, World
Compliance and others. The system scans all Сustomers with faces from the
directories for matching. The import/update frequency of Sanction Lists is
configurable on system by User (AML/ Monitoring Officer).

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Sanction Lists Parameters:

Main Parameters Screening Name

Screening Description
Business Units/Tenant /Organization Name
List Screening Set Up 1.Manual – “Browse” button and upload a file
2.Automatic:
• URL
• Upload Retries (max retries before abandoning the upload)
• Wait before retry (pause between each entry in seconds)
• Max Upload Time (max allowed time in seconds spent for
whole upload, includes retries and wait times)
• Max Import Time (max allowed time in seconds spent for
importing the file)
• Upload retries (sec) - max retries before abandoning the
upload
Configuration File List takes/reads its settings from this file.
1.Format:
• XML
• CSV
• XLS(X)
2. Persistent IDs - Yes/No - In order to keep confirmed matches,
it is need to have the old list data when importing new list
3. Normalization Options
• Normalize Names
• Normalize Countries
• Dates Format: DD /MM/YYYY

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Data Normalization Management

Names Remove  Contains a list of words that should be removed before making the
Words matching of customer names towards list data. These are words as
"ltd", "sir" and so on. Users can add name words for removal

Minimum Name  Specifies the minimum length of a name-word to be considered. If a

Words Length name word is shorter or equal than this setting, it will not be
considered when matching towards list entry names.

Add Country  Example: Spain, Kingdom of Spain - Spain

Abbreviation
 The list of Correct Country Spellings to be used in Manual Search
Country drop-down filter after removal of duplicates and sorted
alphabetically ascending.

 ISO 3166-1 is also supported and can be used in imported files

Default System  Used to specify how the customer records date is formatted, thus to
Data Format normalize the dates from lists when parsing.

 DD.MM.YYYY

Parse Error logs  In order to get Countries or dates which cannot be normalized (does
not match any normal country name or any date format) when parsing
a list, a log has to be created. The log should contain - list name,
parse/import date, tag and its contents.

Main directories for scanning Sanctions list:

Directory name Links to update

UN list https://scsanctions.un.org/resources/xml/en/consolidated.xml

EU list https://webgate.ec.europa.eu/europeaid/fsd/fsf#!/account

OFAC list https://www.treasury.gov/ofac/downloads/sdn.xml

UK list https://www.gov.uk/government/publications/financial-sanctions-
consolidated-list-of-targets/consolidated-list-of-targets

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2. Monitoring Scheduler Management

This dashboard includes Schedule of sanctions Lists import, current import monitoring, import
results and errors occurred during import Sanction Lists

 Monitoring Scheduler

Frequency of automatic updates is configurable and can be completed at regular intervals.

Loanance web portal can schedule, modify or delete automatic updates. Also can be manually
run selected automatic updates by accessing the list of Scheduler Jobs.

Beginning at the main screen, select Admin, then System from the drop-down menu. This will
launch the System menu. Select Scheduler Jobs.

Loanance web portal generates a list of all scheduled batch jobs. Need to select "Automatic
update <Sanction List Name>" from the list by clicking on it. Once have opened the job's detail
page User can Edit the job and/or View History, Activate/ Deactivate for the selected job.

Automated Update Scheduler run automatically based on configuration and cron job, but can be
manually run it at current time by selecting the scheduler job and click on 'Run Selected Jobs'.
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Check status of scheduler automatic updates:

Check the 'Current Running' column, if it's:

• “No” then the job is not in running state. It's already run or it's schedule for next run has
not yet happened.
• “Yes”, the job is still in running state and should be waited until it's finished so that user
can see its results.
•

3. Manual Search Dashboard

In this dashboard, Sanction Lists are available in the context of each person for manual search
with the following data:

o ID and Name of the Sanction Lists

o Legal Basis
o Full Name
o Other Name
o Type (Individual/ Entity)
o Date of Birth
o Gender
o Passport number
o Country of residence
o Address of residence
o Citizenship
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o ID
o Tax ID
o Type (Individual/ Entity)
o Match status
o Match percentage
o Status (Active\ Blocked)

Individual’s screenshot in case of filter by Individual in summary table:

Entity’s screenshot in case of filter by Entities in summary table:

Filter by Country, Name of the Sanctions Lists and full name is also available. If click an entry
from the results table, the system will display detailed information about this person and the
Sanction Lists:

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Parameters AML Manual Search

Search  Search Algorithm:

- Search criteria can work combined (logical AND);
- For Country - dropdown, with values from List Data
Normalization
- Birth Date and Name is <input box>
- If a value from search options (date, country, name) is omitted
(empty), portal considers it as "any", example: user doesn't
specify country, does not specify date, only name - then all
countries and dates return score as if they match with name)
 There is Reset button to clear all search criteria, there is
Search button to apply/execute the search, enter press is considered
as Search button click.
 Search works over lists data, not customers' one
 Export CSV/ XLS
 X button (resets the search/filters values)

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4. Result Dashboard from Matching Process as online alert/pop-up (identify match as
true or false)

When the Monitoring process finds a customer who matches a Lists entry, using the monitoring
algorithm, an alert in case of 85-99% matching (configurable) is raised shown to the User (AML/
Fraud/Monitoring officer). Then, the users can check if the match is real or false positive and
mark it as such by providing comment and attachment if needed. True status will mark a
customer as found in Lists indicating the Lists type (sanction, watch, PEP).

*** There should be a mandatory option to send a notification to multiple email addresses about
a match (automatic emails).

Search and Results Table Data:

Match Details Table Data

If click an entry from the results table, the system will display detailed information about a
person from the Sanction List and about a Customer with whom has a match (there is a link to
the Customer's profile, where User can directly block the customer, if it is required. Action
should be performed by M/C):

Individuals screen:

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Entities screen:

Change Match Status in Match Details Data, by clicking entry:

Parameters for AML Monitoring Results

Search by  Filters work combined (logical AND). There is Reset button to clear
filters, there is Search button to apply/execute the filtering of the
results, enter press is considered as Apply filters.
 Name or Customer ID: <input box>
 Country: <drop-down> with values from List Data
Normalization → Correct Country Spellings
 Birth Date From-To: <date control>
 Status:
o New (checkbox - when ON, shows customers which have at
least one result match with status "New"; Selected by
default)
o Inquiry (checkbox - when ON, shows customers which have
at least one result match with status "Inquiry"; Selected by
default)
o True (checkbox - when ON, shows customers which have at
least one result match with status "True")
o False (checkbox - when ON, shows customers which have at
least one result match with status "False")
 Match Date From-To: <date control> (filters customers that have a
match in the given date range;
 Export: the result as CSV/XLS It should contain Customer Data
from Results Table, and corresponding data from Match Details
Table (there can be more than 1 match data line per customer)

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5. Standard AML and Monitoring Reports

# Report Name Description Update frequency

1. Monitoring The system should generate
Identification Data reports based on
identification data from
customer profile and KYC
with possibility to search/
find out exact customer or
another data. Filters should
work as separately as
simultaneously, but not than
3 filters at the same time
2. Monitoring of The system should generate
Blocked Customers Lists of blocked customers
based on Sanction Lists
3. Customer Matched The System should generate
Report Matched Customers based
on Alerts status: True, False,
Inquiry
4. Errors Report The system should generate
report based on all errors
during updating/ uploading
Sanction Lists
5. Sanction Lists The system should generate
report based on all Sanction
Lists with their statuses,
creation date, date of last
updating, number of entries,
matching numbers and etc.
Reports
Template

Should be a possibility to send a report to multiple email addresses according to the specified settings:
* Frequency of sending the report: daily/weekly/monthly
* Data period (from and to)
* email addresses

6. Algorithm creation/selection

The system should support one or more types of algorithms for matching fields in one record
with fields in another record and it can be selectable by the Customer.

Following types of algorithms are available in Loanance portal:

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# Match Description
Algorithm

1 Exact match This algorithm defines the similarity of two strings. For example,
salesforce.com and Salesforce are not a match because the strings are not
identical. The algorithm returns a match level value of 0.

2 Acronym This algorithm defines the correspondence of the official name to the
acronym. For example, the name "Advanced Micro Devices" and the
abbreviation "AMD" are a match, so a match level is equal 100%.

3 Jaro-Winkler String metric measuring an edit distance between two sequences. The
higher the Jaro–Winkler distance for two strings is, the more similar the
strings are. The score is normalized such that 1 means an exact match and
0 means there is no similarity.

4 Fuzzy matching Approximate string matching, fuzzy name matching, or fuzzy string
matching that identifies similar, but not identical elements in data sets.

5 Soundex Phonetic algorithm for indexing names by sound, as pronounced in

English. It takes a person’s name as input and produces a character string
that identifies a set of names that are (roughly) phonetically alike.

6 Levenshtein The Levenshtein distance is the sum of the number of character

Matching transpositions and the number of character insertions/deletions.

levenshtein('mister','mister') == 0
levenshtein('mister','master') == 1
levenshtein('mister','maser') == 2
levenshtein('mister','laser') == 3
Levenshtein distance can be used to write a query that finds all the
database entries that are within one character of the input string ("Robert
Harington"). To keep things simpler can be compared the "full name", a
concatenation of the surname and given name.

7 Phonetic Phonetic matching approaches typically generate a phonetic key for each
Matching string. A string’s key tries to capture the essence of its pronunciation.
Two strings having the same key are deemed to match. The algorithms
differ in the details of how they construct the phonetic keys.

8 Keyboard This algorithm defines the similarity of two strings based on the number
distance of deletions, insertions and replacements of characters required to convert
one string to another, which is calculated from the position of the keys on
the keyboard.

9 Hybrid Method Backfilling the weakness of one approach with the strength of another is
the best possible approach. For example, can be used fuzzy matching to
winnow the initial candidate pool of millions of names down to a smaller
set of highly likely matches. Then, the list can be culled using Jaro-
Winkler or Soundex method to whittle the list down even further by using
the linguistic variations of names in each language. This produces the
most accurate results possible in a short amount of time. Or there may be
combinations from other types of algorithms, like Soundex + Levenshtein

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and etc.

According the above algorithm types, match results should be displayed as a percentage, exact
match is equal 100%. And the following options are available to Customers based on the match
results.

 Once a customer is identified and the match level is 96 -100% (values are customizable),
system will automatically block the customer, then push notification should be sent to the
AML/ Fraud/ Monitoring Officer or any other required Staff and blocked customer(s)
appears in respective reports.
 Once a customer is identified and the match level is 85 – 94 % (values are customizable),
push notification should be sent to the AML/ Fraud/ Monitoring Officer or any other
required Staff for further verification. If the match will be confirmed, AML/ Fraud/
Monitoring Officer should confirm by pressing the "True" button, if will not be
confirmed, Customer should be missed by pressing "False" button.

7. Customer Quick Search from Sanction Lists

If it is required to verify the Customer during the initial registration by Staff or in any other
necessary cases, Staff can check the Customer by entering the full name in the quick search box
in the AML Module on Sanctions lists in the system for a match
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Lookup Customer:

Lookup Results:

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