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AML sanctions screening - staying ahead of the game

Recently I co-hosted a webinar on AML sanctions screening alongside Chrisol Correia, Director of Strategy at Dow Jones Risk & Compliance. The presentation gave us the chance to examine some of the challenges facing financial institutions in their payments sanctions screening programmes.

Chrisol discussed some of the technical issues that can frustrate the process. He noted that some 12% of records on national sanctions lists contained anomalies, while 33% lack basic information such as a date of birth or even surname. As the conversation progressed, however, it became clear that the real issue at play was the increasing globalisation of sanctions screening regulation. In the past few years the combination of the three key regulatory requirements – FATF (Financial Action Task Force) Special Recommendation VII, NACHA IAT and SEPA – has resulted in ever rising volumes of payments that need to be scanned. Not so long ago, institutions would just have to screen the portion of payments which crossed international boundaries. New regulations are now dictating that certain payments previously classified as domestic should now be scanned. In short, complying with this complex and ever more geographically wide-reaching regulation using existing methods is becoming increasingly less viable.

So what can institutions do to cope with these increasing demands? The old methods would dictate that the way to manage increasing volumes without breaking the bank is to try and create a tighter search net and avoid false positives. But this leaves the banks at risk of missing illegal payments, and being issued fines into the hundreds of millions of dollars – it’s a false economy and a high reputational risk. However, by centralising systems and standardising where possible, institutions can streamline their screening procedures. This allows more efficient working and makes it easier to apply controls. With centralised monitoring, institutions then also have the option to put technology to use that can actively learn which payments to flag and which to green light based on previous experience.

Those institutions that choose not to apply advanced filtering technology will find it increasingly difficult to cope under the flood of regulatory requirements. They will have to either expand their legacy screening system – at great cost – or narrow their screening process – and risk regulatory fines and actions. Those who do modernise and move to adapt will find themselves ahead of the game, with reduced risk and costs, and benefit from a more streamlined business process to boot.


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