EFTA01414774.pdf

Subject: RE: 2018 AFC EDD Audit [SC] From: Vanessa Mendez e > Date: Wed, 25 Apr 2018 17:17:38 -0400 To: Janice Franklin <[email protected]> Cc: Wayne Salit Yoonsun Chung Douglas G Rosa Nicole Alexander Tope Owoyemi Zeljka Smallman Anthony Busanic Classification: Strictly Confidential Good afternoon Janice, Please see my responses below in blue and attached supporting documentation. Best, Vanessa Mendez From: Janice Franklin Sent: Wednesday, April 25, 2018 12:31 PM To: Zel'ka Smallman Vanessa Mendez Cc: Wayne Salit Yoonsun Chung Douglas G Rosa ; Nicole Alexander Tope Owoyemi Subject: RE: 2018 AFC EDD Audit Dear Zeljka, Vanessa and Anthony: Just a reminder to provide us with the details requested below. Thanks. EFTA01414774 Regards, Janice P. Franklin {cid:[email protected]} Janice Franklin, CAMS, CFSA, CFIRS Vice President I AML Compliance Officer Deutsche Bank Americas Regulation, Compliance & Anti-Financial Crime 60 Wall Street, 10005-2836 New York, NY, USA From: Janice Franklin Sent: Monday, April 23, 2018 12:10 PM To: Zeljka Smallman ; Vanessa Mendez Anthony Busanic Cc: Wayne Salit ; Yoonsun Chung Subject: 2018 AFC EDD Audit Good morning Zeljka, Vanessa and Anthony: I hope this email finds you well. In conjunction with the 2018 AFC EDD Audit, could you please provide us (Business Line AFC — WM) with the backup details (e.g., client name, client #s, KYC #s, etc.) allowing us to identify the specific clients cited in your preliminary report? The details required are listed below (provide only if comments pertain to WM): Finding #1: EDD Risk Management Control and Policy Framework 2 clients identified as PEPs not escalated to AFC 1 high risk client not escalated to AFC for approval EFTA01414775  7 client records not updated to reflect their PEP status (for WM AFC, this is applicable to 2 clients) EDRs not initiated for 8 active clients (should be 7 of 8 active clients). (Please refer to the attachment: SARs_supporting documents.docx for supporting documentation) SAR Filed Date Status Most Recent In Progress / Approved Case # Most Recent Approved Case Date Risk Rating EFTA01414776 PCS or Private Banking GA Commentary Client Name 1 6/15/2016 Active 1139500 10/24/2013 Low WM - PCS / Brokerage GA was unable to identify an EDR case raised after the SAR was filed. Additionally, this client remains at a low risk rating. John Clinton Hathorn Retirement Trust, John Hathorn 2 9/7/2016, 6/2/2017, and 8/17/2017 Active 1791049 EFTA01414777 7/18/2017 Low WM - PB GA was unable to identify an EDR case raised after the SAR was filed. Additionally, GA was unable to locate evidence this client was considered for off-boarding after multiple SAR filings. This client remains at low risk rating. Darren K Indyke 3 12/29/2016 Active 1822198 11/7/2017 High WM - PCS / Brokerage GA was unable to identify an EDR case raised after the SAR was filed. Steven A Tananbaum 4 3/2/2017 Active 1285836, 1311844 12/3/2014 EFTA01414778  Moderate WM - PB GA was unable to identify an EDR case raised after the SAR was filed. Additionally, this client remains at a moderate risk rating. Metro Joy Management LLC Metro Joy International LLC 5 3/2/2017, 5/5/2017, and 9/8/2017 Active 1311844 10/3/2014 Moderate WM - PB GA was unable to identify an EDR case raised after the SAR was filed. Metro Joy International LLC 8/25/2017 Active GA identified three cases were created on 08/25/27, same day of the SAR filing, where the SAR subject / client is the U60. 9/20/2017 High WM - PB No exception noted. RDW Capital LLC EFTA01414779 6 7 10/18/2017 Active Unable to locate a case. DbForce states "Legacy Risk Calculator Review". Unable to locate a case. DbForce states "Legacy Risk Calculator Review". Moderate WM - PB GA was unable to identify an EDR case raised after the SAR was filed. Additionally, this client remains at a moderate risk rating. Axcis Information Network Inc 8 11/22/2017 Active 1830090 In Progress (created on 9/21/2017) High WM - PB EFTA01414780  GA identified a case "in progress" created on 9/21/2017. (Two months before the SAR filing). Mons Investments CV 49 clients with RR due dates greater than 1 year 27 moderate risk clients with RR due dates greater than 2 years 31 low risk clients with no RR due dates The all KYCS Risk Rating report was run from DbForce (PB). (Please refer to attachment: WM all KYCS — 1st report-_ .xlsx) Finding #3 direct owner (99.9%) not included in the ownership chain of the KYC profile clients with PEP relationship not escalated to BLAFC — if different from comment listing under Findings #1 clients with PCR/negative news not escalated to BLAFC for review Finding #4 Specific MI which GA was unable to reconcile/re-perform (Regarding discrepancy[s] noted across four month of MI reviewed.) GA had provided supporting documentation for this previously, but I have re-attached, with an updated screen shot regarding the discrepancy noted in PEP totals. (Please refer to attachment: Reporting & Statistics for WM AFC sent on 04.25.18.docx) 1. For the month of April (reported in May) for Private Bank: a. GA reviewed the statistics provided in the MRC deck (page 45) and noted: 25 low-risk clients; 20 moderate-risk clients; and 8 high-risk clients. The statistics WM AFC provided the MI team totaled 8 high -risk clients. However, during the walkthrough, GA noted there were 9 high-risk EFTA01414781 clients on the NCA report from DbForce; not 8 as reflected in the MRC deck. b. GA reviewed the statistics in the MRC deck (page 45) and noted: 3 NCAs associated with high-risk jurisdiction; 7 NCAs associated with high-risk industry; 4 NCAs with doubtful / negative information; and 1 NCA treated as a PEP relationship. This results in a total of 15. The statistics WM AFC provided to the MI Team were the same, totaling 15. However, during the walkthrough, GA noted that there were 9 high-risk clients on the NCA report from DbForce; not 15 as reflected in the MRC deck. c. GA reviewed the statistics provided in the MRC deck (page 45) and noted, for April 2017: 429 total PEP clients. The statistics WM AFC provided to the MI Team were the same, totaling 429. However, during the walkthrough, GA noted 431 PEP clients as the total. d. GA reviewed the statistics provided in the MRC deck (page 48) and noted: 0 permanent exceptions granted for high-risk KYCs; and 4 permanent exceptions granted on low and moderate KYCs. GA filtered the "Permanent Exceptions" report for April 2017 by column F, "Primary officer / RM Approval date" which resulted in one temporary exception. However, the MIS report shows 4 permanent exceptions granted in April 2017. 2. For the month of July (reported in August) for Private Bank: The MRC deck totals for Private Banking July NCA are as follows: 14 low-risk clients; 4 moderate-risk clients; and 8 high-risk clients. However, the NCA Report from DbForce shows: - 7 high-risk NCAs; not 8 as reflected in MRC deck; - 6 moderate-risk NCAs; not 4 as reflected in MRC deck; and - 11 low-risk clients; not 14 as reflected in MRC deck. 3. For the month of September (reported in October): For Private Bank, MRC slide 146 of the MRC deck reflects incorrect statistics. For "Key Risk Drivers for High Risk NCAs" & September Key Risk Drivers for High Risk NCAs do not include September 2017 totals. As such, GA did a comparison of metrics WM AFC provided to the MI team for September. GA noted the following numbers WM AFC provided to the MI team: 14 low-risk, 15 moderate risk, and 2 high risk. However, the NCA report GA ran showed as follows: 5 high-risk NCAs, not 2 high risk as WM AFC reported; 14 moderate-risk NCAs, not 15 as WM AFC reported; and 14 low-risk NCAs (no discrepancy) - For Brokerage, MRC slide 146: GA was unclear as to whether the "Key Risk EFTA01414782 Drivers for High Risk NCAs" and "August Key Risk Drivers for High risk NCAs" were intended to be duplicates. In previous month(s), the total were different in both charts. There is a discrepancy in the breakdown between the two charts. Neither population breakdown reconciles against the source report, PershingAccountsWithAmlRiskDesignation, which reflects four (4), not three (3), key risk drivers, as follows: - A04 (locally / divisionally defined high risk countries), - B11 (healthcare and pharmaceutical), - B13 (locally / divisionally defined risk industries), - and CO2 (doubtful reputation/negative information). Further, one chart reflects a total of 5 NCAs across 3 key risk drivers, and the other chart reflects 9 NCAs across 3 risk drivers. However, per PershingAccountsWithAmlRiskDesignation report, there are only 3 NCAs. 4. For the month of October (reported in November) for Private Bank: - Slide 162 of the MRC deck reflects: 29 low-risk clients; 14 moderate-risk clients; and 3 high-risk clients. However, per the NCA Report GA ran, the totals were as follows: - 2 high-risk NCAs, not 3 as reflected in the MRC deck; - 13 moderate-risk NCAs, not 14 as reflected in the MRC deck; and - 29 low risk-clients (no discrepancy) Thanks. Regards, Janice P. Franklin {cid:[email protected]} EFTA01414783 Janice Franklin, CAMS, CFSA, CFIRS Vice President I AML Compliance Officer Deutsche Bank Americas Regulation, Compliance & Anti-Financial Crime 60 Wall Street, 10005-2836 New York, NY, USA EFTA01414784