Get retroactive with your sanctions screening

In their efforts to remain compliant—and profitable—modern financial institutions have adopted real-time sanctions screening as a battle-tested best practice.

However, regulatory bodies update their watch lists quite frequently. For instance, OFAC updated its SDN list 75 times in 2016. Each update adds or removes prohibited parties to the list—and additional risk for financial institutions that don’t update and rescreen their clients and vendors in a timely manner.

This increased risk necessitates retroactive screening, which allows institutions to screen continuously against newer versions of watch lists. Here are the two top challenges your financial institution could face when attempting to keep sanctions screening processes updated and relevant—as well as ways you can rise to meet them:  

Challenge #1: Scaling Up

Scale is an important factor when considering your financial institution’s risk. Every customer or vendor, in addition to each transaction, exponentially increases the number of records that must be maintained. Thousands of customers could generate millions upon millions of records—all of which are subject to an ever-changing set of regulatory expectations and watch lists.

To maintain compliance, your financial institution must have an automated sanctions screening solution in place that can handle millions of queries per day, along with batch screens (the automated process whereby a large set of names is grouped together into a single file and screened in one process). This solution must have the capability to rescreen against all relevant sanctions lists as they are updated.

Challenge #2: Reducing False Positives

While the prior challenge primarily involves preventing interactions with prohibited individuals or organizations, false positives pose a different kind of risk.

False positives represent cases in which a legitimate customer or vendor is mistakenly flagged as a prohibited entity, temporarily blocking a transaction and requiring human intervention to rectify the issue. False positives mainly occur when the individual’s name is very similar to a name on a restricted party list.

For example, your customer John Smith’s online account application might be flagged if your platform matches his name with a suspected money launderer also named John Smith. Your sanctions analysts must then review and disqualify that match, which causes delays in the customer experience.

While false positives may not carry the regulatory risks that screening failures do, they have the potential to disrupt operations and, even worse, negatively affect the overall customer experience.

The Solution: Automate Retroactive Screening Across All Lines of Businesses

When it comes to screening and rescreening against watch lists, automation across all lines of business and transaction types is ideal. Manual screening takes far too much time and poses an immense operational burden. The sheer scale of modern-day institutions necessitates automation and batch screening to keep up, particularly as a financial institution grows and expands its offerings.

For a deeper dive into the various challenges that sanctions screening presents, read CSI’s white paper, Sanctions Compliance: Automating Retroactive Screening.