A Guide to Anti-Money Laundering for Crypto Firms

5 Ways to Perform Better AML Sanctions Screening

Sanctions Knowledge & Training

Increased enforcement efforts are shining a spotlight on AML sanctions compliance. Financial institutions (FIs) are under pressure to elevate their game to keep pace with regulators’ demands while still providing their customers with exceptional service — which, in today’s world, means service that is fast and frictionless. It’s a difficult, but by no means impossible, task.

The key is to take a diligent, risk-based approach to AML sanctions screening that assigns equal importance to high-quality, real-time data and the implementation of a technology stack that supports both your business goals and compliance obligations. While it’s true that one size does not fit all, there are a few goals that all FIs should pursue in order to successfully navigate the global economy’s fast-paced and complex sanctions landscape.

1. Respond Quickly to Changes

Government bodies impose, lift and modify AML sanctions lists regularly. For FIs time is of the essence; it’s their responsibility to monitor for changes and act on them right away. If the money flow to sanctioned entities and individuals isn’t stopped, it could mean a hefty fine from regulators.

Being responsive requires having the right data at the right time. To close compliance gaps, FIs would be wise to monitor the lists maintained by OFAC, the EU and the UN as well as those specific to the countries or regions in which they operate. Yet since there’s significant overlap, having a list management solution that consolidates data and offers real-time updates is crucial to staying on top of the various changes across all sanctions programs and reacting quickly.

2. Reduce Decision Fatigue

A mountain of false positives during the transaction screening process turns what should be an automated process into a manual one that’s highly prone to human error due, in part, to decision fatigue. This runs counter to meeting customers’ expectations that transactions should be completed in seconds.

FIs should deploy a robust rules engine that can screen against a variety of scenarios. Then, taking into account their specific sanctions risk profile and risk appetite, these FIs can design rules to maximize the quality of alerts generated and flag transactions according to severity, from Level 1 remediation all the way up to a hard stop. That way, compliance officers can efficiently sort through the alerts generated, releasing funds faster and ultimately providing customers with a more seamless experience.

3. Keep the Noise Down

False positives bog the entire sanctions compliance process down and force compliance officers to manually screen names one by one against AML sanctions lists, which is a monumental task when changes happen frequently. Alerts accumulate — HSBC once had 17,000 alerts awaiting investigation — and backlogs quickly become impossible to clear.

Whitelisting certain matches prevents those same results from showing up again and again after you’ve marked them as approved, reducing the number of false positives that appear with similar searches over time. This, along with the use of fuzzy matching tiers, helps compliance officers prioritize their investigations and reduce the time spent on irrelevant matches.

4. Work With What You’ve Got

Speed is much less of a competitive differentiator and much more a customer — and regulator — expectation today. A simple yet important step towards eliminating friction and maximizing efficiency in workflows is to implement processes and systems that work with your existing technology. This provides your compliance officers with the same seamless user experience your customers expect while still facilitating quick responses to sanctions updates.

FIs need to choose sanctions screening tools that integrate with their existing payment processing systems via a RESTful API and a set of webhooks that allow two-way data transfer between systems. This means your compliance officers can work using one contained platform to investigate and clear transactions quickly and efficiently.

5. Keep a Log

Being in compliance with sanctions means little to regulators if you’re unable to prove it. FIs must demonstrate to regulators that their processes have been effective at stopping payments designated for sanctioned individuals or entities.

An easy-to-follow audit trail is imperative. Tools that automate the process of tracking sanctions activity as it relates to a specific individual or entity, as well as a financial institution’s response to changes in that activity, eliminate the risk of human error and make such information easily accessible.

Meeting the sometimes contradictory demands of both customers and regulators is challenging. With sanctions increasingly becoming a tool of “first resort” — especially for the US — the task is likely to become even more complicated, especially when foreign policy goals diverge. Juggling both will require an agile, automated approach that provides your company with the most up-to-date sanctions information and that can be tuned to your specific workflow requirements and the unique challenges your company faces.

Learn more about how to optimize your transactions sanctions screening process here.

Originally published January 30, 2020, updated November 17, 2021

Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

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