To remain competitive in today’s fast-paced economy, organizations face significant challenges, many of which are interconnected. In terms of compliance and risk management, companies must have not only the capacity to accurately identify customers and vendors, but also the ability to quickly process transactions for goods and services while minimizing the risk of running afoul of numerous rules and regulations that sometimes accompany such transactions.
The solution to meeting these needs must offer a delicate balance between risk management and speed. It must also address four major challenges of incorporating real-time screening, including:
1. Managing the Vastness of Data Sources
Any organization doing regular business is likely to find itself dealing with millions upon millions of records, all requiring near-instantaneous retrieval, screening and possibly flagging. But frequently, data sources are disconnected within the organization, making it difficult to establish real-time watch list screening practices that encompass all relevant data sets.
And that is merely the beginning. All of that internal data must then be screened against numerous state, federal and international watch lists, depending on the regulatory expectations of a business. OFAC’s Specially Designated Nationals (SDN) list alone includes thousands of prohibited people or entities at any given time. And while OFAC is perhaps the most widely cited watch list, it is only one of potentially hundreds of watch lists that a business may be required to screen against in real time—as well as re-screen when list updates are issued.
2. Language Translation/Transliteration
While the global economy has opened up incredible opportunities for businesses to rapidly expand their reach, it also brings complications in terms of compliance. Many regulatory agencies provide lists only in Roman characters, leading many screening solutions to fail to identify prohibited transactions.
Businesses with inadequate translation and transliteration processes face possible regulatory fines for failing to screen potentially prohibited individuals or organizations. They also risk losing customers or vendors that could be inconvenienced by delays from being identified as a false positive.
3. Monitoring Payment Flows
The sheer volume and number of transaction sources in an organization can further complicate sanctions screening. Monitoring the flow of payments grows exponentially more difficult as a business expands its customer base and the products and services it offers. In this case, challenges include onboarding/KYC and identity verification of customers and vendors, transaction screening, maintaining watch list updates, and retroactive screening of customers and vendors after updates.
An effective sanctions screening solution must be able to handle payment flows at scale—and at speeds that don’t inhibit the flow of business or inconvenience the end user. In some organizations, this could means millions of names and billions of transactions across possibly hundreds of systems managed by teams from all over the world.
Organizations must keep up with the volume of transactions flowing through their systems and ensure that all parties on all transactions are screened against the appropriate lists according to industry regulation. Remember, regulators are watching: According to a member survey at ACAMS’ 22nd Annual International AML and Financial Crime Conference, 58 percent of attendees said a regulator or auditor has challenged their methodology for conducting sanctions risk assessments.
Further, integration of all that data into a sanctions-screening solution must be transparent and non-disruptive. For example, a person making a purchase through a digital distribution platform such as Apple’s App Store should be blissfully unaware of the complex set of sanctions screens that take place on a sub-secondary level when they hit the “buy” button. That is, of course, unless the buyer is flagged.
4. Screening Transactions in Real Time
A lack of real-time screening capability could have several operational side effects, including the impediment of goods and services to customers. Because modern technology enables consumers to acquire goods and services in an instant, businesses must be able to screen transactions in real time.
Real-time screening significantly mitigates the risk of prohibited transactions, giving businesses the ability to conduct proper due diligence before a parcel leaves the warehouse, before an online purchase is completed, or before a digital wallet is used. Any compliance solution that doesn’t allow for real-time screening at these levels could result in potential risks being detected only after a transaction is complete. And by that time, correcting a prohibited transaction becomes exponentially more difficult.
Though the challenges are many, both regulators and consumers demand a real-time screening solution from your organization. For more information on overcoming the challenges of implementing real-time screening, be sure to read our white paper, Sanctions Compliance: Deploying Real-Time Watch List Screening.
Rosalie Griebel serves as director of product management for CSI Regulatory Compliance Group. In her role, Rosalie oversees the strategic development of CSI’s various regulatory compliance solutions.