How Can AML Watchlist Screening Protect Your Business from Hidden Risks?
AML watchlist screening is a procedure that can be described as a comprehensive process of comparing customer data against a set of predefined lists that particularly contain data related to individuals, entities, and countries who are deemed high risk or sanctioned. Processes of such a nature helps in ensuring that businesses or financial institutions are fully complied with the regulations and prevent the engagement with high risk individuals or entities altogether. Today in this blog we’ll be studying about the intricacies of AML watchlist screening, relevant facts and figures.
The Watchlist Screening Procedure
1. Information Gathering
Compiling the data of clients in a thorough manner is done in the initial stage in the watchlist screening process where financial institutions tend to gather information which include the names, dates of birth, residences, identification numbers, and other pertinent data during the onboarding process. Information screening of such a sort is taken as an essential checkbox to tick off for the purpose of guaranteeing that the business or organizations have enough data to make accurate comparisons along with the watchlists ast the same time.
2. Integration of Lists
Institutions or organizations related to the financial field are most likely to incorporate different watchlists within their screening systems after gathering the required client data where sanctions, politically exposed persons (PEP), negative media, and other high risk organizations or people are on these watchlists. Element of screening stays strong and complies with the laws and no pertinent list is missed if the integration is done correctly.
3. Matching and Screening
There are two types of entries in the integrated watchlists which are supposed to be compared with the customer data and both of them are explained as follow:
Exact Matches: The type of information of a customer where the matches get exactly aligned with a watchlist record have the tendency of indicating a possible compliance issue.
Possible Matches: The type of information of a customer where the matches get partially aligned with a watchlist record such as similar names or aliases that ends up requiring more research.
4. Examination and Research
Compliance teams are still used to the manual nature of examining the possible matches with the purpose of verifying their legitimacy when they are flagged. Cross referencing of extra data and then confirmation might help in highlighting where the consumer is actually associated with the watchlist in order to differentiate between the real threats from false positives and the false negatives.
5. Reporting and Decision Making
Institutions or organizations that are involved in the process of conducting watchlist screening are encouraged to make well informed decisions following the evaluation process. Their next step might be to stop questionable transactions, permit lawful ones to continue, or submit questionable Activity Reports (SARs) to the appropriate regulatory bodies for further investigation. Reporting further assists in the investigation and prosecution of possible financial crimes simply through the law enforcement.
Facts and Figures About AML Watchlist Screening
Global Watchlists: There are over 1,200 sanctions and watchlists that are specifically maintained through the various international organizations, governments, and private entities all over the world and prominent ones include OFAC, the EU Sanctions List, and Interpol’s wanted lists also.
Financial Penalties: Financial institutions or organizations in the jurisdiction of North America and Europe have paid over $4 billion in the year of 2024 alone on the account of fines for being noncompliant with respect to anti money laundering regulations which further include inadequate watchlist screening too.
PEP Risks: Research which has been done in recent times helped in indicating that PEPs account for 10% of the global money laundering cases have put so much emphasis on the importance of strong PEP screening.
False Positive Rates: Average rate of the false positives in the overall field of anti money laundering systems tends to range between 30-50% that has cost the financial institutions millions annually when they conduct reviews and investigations in a manual manner.
Technology Adoption: There are over 70% of the financial institutions in the region of Europe and North America which are utilizing the features of artificial intelligence and machine learning in order to enhance the watchlist screening which ultimately resulted in reducing the false positives by up to 20%.
Cross Border Transactions: Value of cross border payments has exceeded the amount of $150 trillion in the year of 2023 that can clearly highlight the critical role of anti money laundering screening when it comes to preventing the illegal financial flows.
AML Watcher offers powerful features to ensure your business stays compliant and secure. By utilizing advanced AI and machine learning technologies of Immediate X2 ProAir, AML Watcher enhances the screening process, effectively reducing false positives while providing accurate, real-time comparisons with over 1,200 global sanctions and watchlists. AML Watcher helps you easily manage the complexities of screening, offering seamless integration and automated reporting to ensure your organization stays ahead of potential financial crimes.
