AML watchlist screening

Recent high-profile money laundering cases have resulted in more stringent risk assessments and Know Your Customer (KYC) standards, instigating the anti-money laundering (AML) regulatory landscape to undergo significant changes.

It’s no secret to anyone. Where there’s money, there’s crime. By implementing a comprehensive AML and KYC program, businesses are better equipped to respond to new standards and regulatory changes, which will help detect high-risk individuals before it’s too late.

Since 2004, $14.8 billion have been levied in fines to banks caught taking deposits from parties that are on sanction lists. Sanctions lists include politically exposed persons (PEPs), someone entrusted with a prominent public function or their family members of close associates. Due to their position of power and influence, these individuals present a higher potential risk of involvement in corruption and bribery.

These AML sanctions lists, referred to as watchlists, are a compilation of multiple regulatory and enhanced due diligence lists from all major sanctioning bodies around the world, including global lists such as OFAC, UN sanctions, EU sanctions, HM Treasury and PEP, and in-country lists.

Protecting your organization’s reputation, revenue and capital begins with identifying your customers, ensuring they are who they say there are, and checking to make sure they have not been placed on sanctions lists around the world.

Over 120 AML Sanctions Lists

How does a bank ensure it retains compliance without grinding to a halt from the due diligence and screening it needs to perform? After all, a large global bank can process over 200 million transactions a day and needs to monitor AML sanctions lists around the world in multiple languages.

Besides the risk of penalties, there is also the high cost of manual review of false positives, the danger of losing customers to mistaken identities and increased friction in account openings and financial transactions. Identifying customers with high reputational risk is a significant risk, cost factor, and burden to smooth and timely operations.

A comprehensive screening program will help efficiently weed out bad actors and keep businesses safe from fraudulent activities and financial crime.

Watchlist Screening Program

An effective screening program requires two critical pieces – identity verification and watchlist checking. First, a financial institution (FI) needs to know accurately, and with certainty, the identities of the parties to a transaction. This first step can be a major challenge since many of the most fraud-prone countries have poor public records and criminals are adept at hiding their true identities. Performing identity verification against multiple independent and reliable data sources can help address this problem.

The second step, which can be done simultaneously, is to run the identity against a comprehensive set of watchlists. An effective screening program should incorporate watchlists that offer global coverage and lists from all the relevant sanctioning and law enforcement agencies. The program should perform real-time or near real-time checking, since names are added to watchlists, and deleted, constantly.

A screening program can also include other useful data sources like scans of news stories that might contain adverse mentions of individuals, or entities, enabling FIs to stay current with negative news in real-time.

It’s not enough to simply screen a watchlist; an effective program needs to make the data useful. Watchlist checking should be accessible during the onboarding of new customers and in batch to examine an FI’s existing client base. Collecting, normalizing and validating data needs to be part of the process to ensure the screening runs smoothly and accurately. Data enrichment also enables the highest level of AML compliance.

Customizing Procedures

Building on their AML program, firms need to develop standards and strategies reflecting where they do business. They can develop risk-based approaches that may heighten alerts for some countries, while relaxing reviews for countries with their own stringent banking regulation.

In a fast-changing regulatory environment, financial firms should integrate comprehensive watchlists that utilize intelligent technology, reliable data, and streamlined processes,” said Rob Hartley, VP of Product at Trulioo.

By leveraging the latest electronic identity verification technologies and data sources, FIs will have complete transparency and flexibility so that they can adapt to changing sanctions such as American openings to Cuba and Iran, or the addition of Russian oligarchs, or Syrian and Sudanese political leaders to sanctions lists.