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Why Your Financial Institution Should Never Scrimp on Its Sanctions Screening Solution

Why Your Financial Institution Should Never Scrimp on Its Sanctions Screening Solution
by John Carlucci - May 3, 2022

Banking, financial services, and insurance (BFSI) companies are primary targets for unscrupulous entities that benefit from financial crimes such as money laundering, terrorist financing, identity fraud, and graft and corruption. To deter criminals from targeting and using their organizations, BFSI companies must have a robust security system in place, one that will enable them to effectively and efficiently distinguish legitimate customers and transactions from financial criminals and illegal activities. This means investing in software solutions that are designed to keep sanctioned and blacklisted individuals away from the system. 

Sanctions Screening: Why Old Solutions No Longer Work as Well as They Used To

Employing a sanctions screening solution is one of the many measures that help BFSI companies keep financial criminals out of their systems. This solution is an important component of many Know Your Customer (KYC) and Customer Due Diligence (CDD) programs. What this solution does is that it compares the details of a prospective or existing customer and the sanctions lists maintained by various financial organizations and regulatory bodies. At first, this task might seem quite straightforward, as the solution only has to match a sanctioned entity’s name and bar the identified persona from availing themselves of the BFSI company’s services. Modern financial criminals, however, are more enterprising than one might imagine, and they have developed strategies to elude dated sanctions screening programs that are designed to detect their presence. These include using aliases, altering their details, and obfuscating markers that matching and screening programs often look for. 

Much like the solutions used in BFSI companies, the methods that criminal entities use to compromise the systems of financial organizations are continuously changing. This means that to ensure the effectiveness of their screening process, the companies that make up the financial industry have to keep up with technologies that AML solutions providers are developing and that criminals have yet to overcome.

Modern Sanctions Screening Solutions and the New Technologies They Bring to the Table

Thwarting financial criminals’ attempt to use a financial organization as a platform to carry out their illegal activities is an ongoing affair, and sanctions screening solutions providers are well aware of this fact. As such, the products released by these security software developers are able to do more than match names with the list of known financial criminals and the entities that they are associated with. In addition to finding exact matches across multiple reference lists, modern sanctions screening solutions also make use of other strategies to ensure that identified criminals are not able to make their way into financial institutions’ systems or exploit existing BFSI customer accounts to do the same. This can be done by employing technologies that enable the following:

  • Extensive Matching - Fuzzy screening is a key capability for modern sanctions screening solutions, as it enables them to search for and match sanctioned individuals that use alternative names. Should a known financial criminal try to apply for financial services using an alias or omitting identifying information, for example, the solution can still detect possible matches and provide investigators with a full picture of a prospective or existing customer. 
  • Customer Screening - Modern sanctions screening solutions are capable of determining the risk level presented by present and prospective customers and assigning them levels of screening prioritization based on this information. This, in turn, allows the system to scrutinize high-risk customers more closely compared to low-risk customers. By doing so, the system can effectively control the level of risk that the BFSI company assumes without allowing financial criminals through the threshold or slowing down the screening process.
  • Transaction Filtering - Aside from screening customers, sanctions screening services can also be used to analyze transactions and see if they can be associated with sanctioned entities. This will help organizations catch financial activities and practices that criminal entities use to mask their illegal operations. Even if financial criminals use aliases, they can still be discovered through the analysis of their modus operandi.
  • False-positive Reduction - Smarter sanctions screening programs have the added benefit of being able to reduce false-positive results from their searches. By turning up more accurate results, these solutions reduce the amount of work that human investigators have to carry out to ensure that their cases and investigations have a solid basis and can hold water. They no longer have to spend so much time weeding through false positives, and they can devote much of their resources to investigating legitimate cases of financial crime. 

Avoid the Costs of Scrimping on Sanctions Screening Solution Improvements

Updating and improving a BFSI company’s sanction screening solution is an investment that will continue to pay off over the years. By increasing their budget for sanctions screening now and acquiring new tools that they can use to make customer and transaction screening more modern and more efficient, financial organizations are effectively deterring criminals from targeting them. This can prevent them from incurring fines and reputational damage that they would otherwise be exposed to. Investing in their sanctions screening solutions now will also enable BFSI companies to catch up with the emerging technologies that other financial companies are using to combat financial crime in a quick, practical, and economical manner.

Author

  • John has worked alongside Real Estate Giants across USA and Canada for decades. Since he started Prudentialcal, he has been actively rendering service as business adviser to many companies in the real estate industry. He formed Prudentialcal in hopes of providing the most reliable stories and information there is in the vast industry of real estate

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