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Sanction Screening Service to Prevent Customer Fraud

Living in the age of financial war crimes, as of you are reading this, numerous other global sanctions are being imposed by sanction regulatory authorities such as United Nations (UN), European Union (EU) and additionally the United Kingdom (UK). Under the watch of these ever-expanding sanction regulations, knowing who your customer is, has become crucial more than ever. The twisted nature of compliance and collision of sanctions regimes and obligations are a convincing reason to adopt a consolidated sanction list screening to shield the reputation of your business and develop a shield against sanction compliance and potential customer fraud.

In the light of strict compliance regulations and increasing risks associated with financial frauds, this blog will explore the lesser-known dimensions of sanctions checklist screening and how the future of automated sanctions list screening system will unfold itself.

Ever Growing Compliance Challenges Walking a Tightrope

The broadening spectrum of sanctions has expanded enormously in the last decade (51 to 255) with a rise in financial component from 40 to 70%, stated by the GSDB (Global Sanctions Database). Shattering the sanctioned entities, the unforgiving sanctioning authorities have made the financial sanctions common more than ever. One of the prominent cases of sanctioned individuals, Oleg Deripaska, for supporting Russian war activities after the Ukraine-Russia conflict was banned from accessing his assets in the USA. Not only did he lose his business in terms of suppliers, investors, and buyers, but the market worth of his companies witnessed a downfall from $6.7 billion to $3.6 billion.

Awakening the critical need for institutions to opt for sanction list screening software to combat financial frauds of sanctioned clients and mitigate sanction compliance risks, FATF has ruled standard recommendations and methods. According to a FATF report on the effectiveness of compliance, among the evaluated jurisdictions only 52% of them have effective screening structures in place while the implementation of these regulatory structures is limited to only 9% of evaluated countries. Supported by facts, the effective compliance structure with sanctioned list check allows your business to develop and implement a cohesive screening plan with prioritized verification and updated sanctions data.

Layering of Customer Fraud and Sanctions Compliance

Setting the compliance standards to fight against financial crimes of money laundering, terror funding and financing for the production of mass destruction weapons, the Financial Action Task Force (FATF) and the Office of Financial Sanctions Implementation (OFSI) has outlined continuously updating limitations on individuals, groups, entities, and sectors. Dubbed as smart sanctions or a swiss knife army, compliance to these sanctions means no institution or any business should get in monetary relationship with entities highlighted gray in the global sanction list in terms of restricted banking and investment activities. Failure to comply with these restraints has resulted in stricter compliance, loss of business, and most importantly caused ripping reputation for businesses. Undermining the smart sanctions, fraudulent actors with their smart ways somehow find a loophole in the amalgamated regulations and achieve their objectives resulting in unrevealed and unmeasurable money laundering and corruption scandals.

Fraud and Compliance Risk Mitigation Sanctions Screening Matters

The affected sanctioned entities, in an effort to save their offshore assets in sanctioning countries, adopt fraudulent ways to either sell their assets or to launder them while undermining the sanctions regulations. If we dig deeper into the realm of exponentially rising economic framework with cross-border transactions, being a globally operating enterprise you get involved with a sanctioned party facilitating the movement of their frozen assets. Similarly, onboarding of a new client in your business venture requires the implementation of an automated sanctions list screening solution embedded with real time monitoring. Such solutions with autonomous sanctions lists and data driven integration allows your business to indicate and filter the relationship of clients with a sanctioned or blacklisted entity involved in fraudulent activities. Prevention of the fraud is just a tip of the iceberg while an in-house effective sanction screening plan enables you to stay ahead of the sanctions compliance saving from hefty fines and integrity loss.

A pictorial understanding of potential customer frauds and how sanction screening helps to mitigate them.

Strategic Analysis of Risk Mitigation Approaches

Staying compliant to FATF Recommendation 40, the organizations and enterprises are required to understand, assess and take counter measures in handling financial crimes majorly involving terrorist funding, money laundering, and risks of proliferation. Let’s take a look at different approaches by various jurisdictions to combat the targeted nature of frauds.

Risk Based Approach

The FATF in its fourth evaluation on compliance effectiveness criticized the adoption of risk mitigation approaches associated with financial crimes. All praise to the awareness of risk assessment, analysis of 59 evaluated jurisdictions reveals that 75% of them are compliant to FATF Recommendation 1 implementing risk based approach and a robust legal framework in place. Jumping from 50 to 70%, a technical compliance improvement rate of 24% was observed, thanks to the follow-up procedures. Based on the technical compliance and meeting FATF Recommendation 40, around 76% of evaluated countries have satisfactory laws and regulations for the compliance implementation, signifying the follow-up process by the FATF regulatory body.

Non-financial Institutions and Compliance Challenges

Highlighted by FATF in its evaluation report, on the basis of effectiveness and technical compliance practices, small to medium non-financial businesses such as lawyers, real estate agents, and accountants have poor understanding of sanctions risk and mitigation. Particularly, in the private sector the effectiveness of terrorist funding and money laundering mitigation comprises 97% of the evaluated countries. This non-compliance to mitigation strategies encourages the enterprises to employ customer due diligence, an effective record keeping of suspicious transactions and to implement a risk based approach.

Enhanced Effectiveness of Screening: Methodic Measures

The critical analysis of effectiveness and technical compliance associated with sanction list screening and compliance reveals the measures implemented by countries in their supervisory framework. Below are the measures your business can implement to achieve higher compliance effectiveness.

  • Better understanding of sectoral based updated risk assessments
  • Implementation of a balanced blend of tools and risk assessment measures evaluating both onsite and offsite activities
  • A broader coverage of regulations on AML/CFT including financial and non-financial enterprises while monitoring the implementation of regulatory measures
  • A well-communicated and maintained cooperation between international and domestic organizations
  • Employment of risk based approach in combating financial crimes for both larger and smaller financial and non-financial institutions and businesses
  • Access to a wide range of sanctions data and sanctioned list check protocols

A comprehensive representation of FATF report on screening evaluation explaining effective approaches to meet compliance needs. 

Virtual Assets Industry Sanctions Screening Approach in 2024

Virtual assets are the future of an ever-evolving monetary world requiring regulatory measures of steel, can we predict the future of this industry? The financial crime news and reports got flooded when the largest virtual assets (VAs) exchange company Binanace was charged against non-compliance to money laundering and sanctions regulations. Evading the US sanctions, the convicted firm was indifferently found involved in facilitating thousands of virtual trade transactions with sanctioned entities particularly al-Qaida, Hamas, and other fraudulent actors. The virtual assets industry with a great potential for facilitating terrorist funding, money laundering, and evading sanctions has been imposed with strict FATF sanctions regulations in terms of targeted financial sanctions. The limitations of liquidity in VAs hinders the occurrence of compliance breach on a large scale, however, FATF emphasizes on counter measures supported by training and implementation of GeoIP monitoring. The monitoring coupled with blocking and analytical tools for blockchain analysis presents a promising sanction checklist screening for the transaction of virtual assets.

How is AML Watcher your Centralized Solution Provider

With an extensive coverage of compliance measures for both financial and non-financial businesses, AML Watcher in alignment with an effective risk based approach enables you to implement a streamline screening meeting FATF standards. Our sanction screening tool coupled with enhanced due diligence protocols allows your business to have an effective technical compliance and engineer a robust shield against frauds and grave financial crimes. Here are the reasons your business will stay ahead of the compliance risks with AML Watcher sanctions screening service.

Seamless Integration

Our robust screening tool efficiently reduces the risk of False Negatives by analyzing the entries across a broader sanctions net and also eliminates the risk of False Positives by using over-screening protocols. AML Watcher implements a precise tuning in its automated tool that aligns with your organization’s risk profile and screening criteria. Leveraged with machine learning technology, we help your business to automate the screening process while saving time and resources.

Customization and Enhanced Performance

Embedded with integral and standard data in compliance with varying regulatory regimes, AML Watcher screening empowers your monitoring framework with configurable settings based on risk and fuzzy logic. It also comes with a customized feature of Add-list and audit record while strengthening the case management. With efficient processing of volumes of records while evidencing for both regulators and internal stakeholders, AML Watcher addresses the growing compliance challenges with its cutting-edge technology.

Empower your business with AML geeks and its screening service integrated with an extensive database of sanctions lists to meet your compliance needs in an ever- growing compliance landscape.

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