Risk Intelligence
In part 1 of this insights series, we looked at screening as an essential part of your banking risk toolkit. Here we outline some key best practices that you can implement to minimise potential risk and stay on the right side of the regulatory curve.
- 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.
All banks and financial institutions need to comply with anti-money laundering (AML), know your customer (KYC) and sanctions regulations – and screening can help you do this by making it easier to pinpoint potentially illicit activity.
Screening is not a “one-and-done” exercise, since the risk landscape is dynamic and risk changes over time. This means that you need to undertake screening checks at the initial stage of onboarding a customer, but also carry out ongoing monitoring to detect any changes in status, and screen all transactions to ensure compliance with global regulations.
Looking specifically at sanctions, the Office of Foreign Assets Control (OFAC) is responsible for implementing and enforcing financial sanctions in the US, but the sanctions landscape is global. Our latest Global Sanctions Index (GSI) report provides a detailed account of the key changes in global sanctions over the past year.
Data and tech for effective screening
Since global sanctions lists are dynamic, changes to customer risk profiles can happen overnight. This means that it is essential to detect changes as they happen.
The right combination of data and technology – along with trusted human expertise – is essential for accurate, efficient screening.
- Trusted, accurate and up-to-date data is the bedrock of effective compliance. Inaccurate or out-of-date data leads to ineffective screening.
- The right technology can remove the potential for human error and free up time that can be used for higher value-add activities. It can help by automatically detecting changes, identifying patterns, and helping you to pinpoint higher-risk individuals, entities and transactions.
The net result is simpler, more effective customer and third-party screening processes.
Three common pitfalls
The right data and technology can also help you avoid some common screening pitfalls, including:
- High false positives: These occur when screening incorrectly identifies an individual, entity or transaction as being higher risk. False positives can slow down processes and negatively impact customer relationships.
- High false negatives: In the same way, screening may miss some high-risk individuals, entities or transactions, raising your risk of non-compliance.
- Dynamic regulations: Ongoing regulatory changes and jurisdictional differences can add complexity to compliance processes.
- These common challenges can undermine your screening programme, with potentially substantial consequences, ranging from hefty fines and operational disruptions to reputational damage. The good news is that by adopting a best-practice approach, you can address these challenges and optimise your screening programme.
Best practice: a checklist
Each bank or financial institution needs to ensure compliance with all relevant regulations in their own jurisdiction, but there are some best-practice approaches that can help ensure efficient and effective screening for everyone:
Implement a risk-based approach
A one-size-fits-all approach to screening does not work. Rather, a risk-based approach tailors screening efforts to the specific risks associated with each customer and transaction, and allocates more resources where higher risk is detected. This approach offers you the best chance of identifying and mitigating risk quickly.
Conduct regular audits
Audits help you to detect problems, streamline inefficient processes and identify opportunities for improvement. A robust, 360-degree analysis of your screening processes by an external third party is often a good idea.
Undertake ongoing training
Ongoing training for all compliance staff is essential, because effective risk management needs a combination of data, technology and human judgement. Compliance specialists can offer valuable insights, so it is essential to fully train staff to fulfil their crucial role in risk mitigation.
Partner with experts
Partnering with sanctions, AML and KYC experts can help you interpret complex regulations and ensure that your screening processes are effective and efficient – and that they align with changing requirements.
Implementing an effective screening strategy is essential for any bank. Efficient screening can help you to streamline your compliance processes, stay compliant, and minimise risk with confidence.
Find a screening solution you can rely on: Contact us today to learn how our advanced screening solutions can enhance your bank’s risk management and safeguard your reputation
Discover LSEG’s suite of screening solutions:
| World-Check |
|---|
| Access accurate and structured information to support your KYC screening and third-party due diligence obligations. World-Check has been used and trusted by the world’s biggest companies for over two decades. |
| World-Check One |
| World-Check One combines our specialist screening software with our proprietary World-Check data to simplify and accelerate your due diligence. |
| Managed Screening |
| Discover how our third-party and KYC Managed Services can help you manage risk, reduce your cost of compliance and free up time to focus on strategic business priorities. |
| Third-Party Risk Screener |
| Discover accurate, high-volume third-party screening to quickly identify potential risk. |
| Customer Risk Screener |
| The Customer Risk Screener app connects your customer and third-party data from customer risk screening with our proprietary World-Check data. It allows you to easily embed and automate customer and third-party risk screening checks into your onboarding and monitoring workflows. |
| Country Risk Ranking |
| Enhance your customer and third-party risk assessment with an accurate view of your location-based risk. Get detailed, risk-based information on more than 240 countries and territories, categorised by criminal, economic and political factors. |
You can also contact us for bespoke screening project requests.
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