Risk Intelligence
Discover why screening is an essential part of your banking risk toolkit – and how an effective screening strategy can help you protect your bank, your customers and your reputation.
- Explore key screening requirements for banks, why it matters and what happens if you fail to comply.
- Uncover best-practice approaches for understanding and navigating screening in banking.
Screening offers a layer of protection designed to help your bank pinpoint potentially illicit activity. This in turn helps create a safer and more stable global financial ecosystem for everyone.
Screening can be used to help you mitigate risk and ensure compliance with global regulations, including those governing anti-money laundering (AML), know your customer (KYC), counter-terrorism financing (CTF), sanctions and data privacy.
Implementing an efficient, effective screening strategy is essential for any bank – and advanced screening tools are available to help you detect potential risks more quickly, save time and effort, and stay up to date with dynamic regulations.
Types of screening
Screening takes different forms, and includes:
Sanctions screening: Sanctions screening helps you identify and prevent dealings with individuals or entities subject to sanctions or other high-risk designations.
Customer due diligence (CDD): This is a fundamental step to help you understand who you are doing business. It should include verifying each customer’s identity and source of wealth.
Transaction monitoring: Monitoring transactions helps you spot potentially suspicious activity, such as patterns involving large cash transactions or unusual wire transfers.
Politically exposed persons (PEP) screening: Individuals who hold or have held prominent public positions may pose a greater risk. PEP screening involves identifying and managing relationships with these individuals, as well as their close family and associates.
Drilling down: sanctions screening
Sanctions screening helps your bank detect transactions with sanctioned individuals, entities and countries.
Sanctioned individuals, entities and countries are subject to restrictions and/or penalties, and banks are prohibited from allowing transactions with them. Sanctions screening checks transactions against sanctions lists to help your bank remain compliant.
In the United States, the Office of Foreign Assets Control (OFAC) is responsible for implementing and enforcing financial sanctions, but the sanctions landscape is global in nature. Specific sanctions have been outlined by the EU, the UN and many other governments, including Canada, Australia, the UK, and many more.
Our latest Global Sanctions Index (GSI) report provides a detailed account of the key changes in global sanctions over the past year, as well as insights into the most important mega-trends – including uncertainty – that will shape sanctions in the coming months.
When things go wrong
Failure to fully comply with all relevant sanctions can lead to substantial consequences, including:
- Fines: Banks can face hefty fines – ranging from hundreds of thousands to billions of dollars – if they are found guilty of transactional activity with individuals, entities or countries on sanctions lists.
- Legal action: Regulatory bodies, individuals or entities harmed by non-compliance with sanctions lists can pursue legal action against the bank responsible.
- Loss of licence: In some cases, regulators can revoke a bank’s operating licence.
- Criminal charges: Bank employees who knowingly engage in transactions with sanctioned parties may face criminal charges.
- Reputational damage: Lasting reputational damage can impact customer trust.
These consequences underscore the importance of robust sanctions screening to help mitigate the risk of non-compliance.
How does screening help?
Screening is a vital first step in identifying potentially illicit activity early in the game. It acts as an early warning signal and plays a critical role in protecting you bank and your customers.
On a more macro level, screening also helps to:
Protect national security: Transacting with sanctioned countries – for example, those involved in or linked to terrorism or the proliferation of weapons – constitutes a serious breach of national security and can result in hefty fines. Screening protects national security by helping individual banks identify sanctioned countries, entities and individuals before engaging with them.
Expose human rights violations: Screening plays an essential role in helping banks to identify and block the flow of funds derived from crimes such as forced labour. By improving accountability and transparency within global transactions, screening can help expose human rights violations.
Identify money laundering: Screening can flag potential money laundering, which can result in severe damage to the broader financial system.
Safeguard banking reputations: Screening helps prevent any links to financial crime – even inadvertent – which can have substantial consequences, including irreparable damage to banking reputations.
An effective screening strategy can offer you immediate benefits and help to keep you on the right side of the regulatory curve.
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