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Sanctions list and KYC: ‘How to overcome the challenges‘

· 5 minute read

· 5 minute read

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border icon  Screening challenges

replacing folders icon  A new approach


Financial institutions need to learn as much information as they can about a client or vendor before deciding to start or to continue working with them. And there is a lot of information out there. So much, in fact, that it’s a massive challenge to gather and review it quickly and accurately.

If you’re a compliance officer or other executive whose job is to reduce your financial organization’s exposure to risk, this isn’t breaking news. A major part of your job most likely involves keeping your bank, credit union, or lending institution out of the news. No institution wants to be caught doing business with companies, legal entities, or individuals that have been sanctioned due to direct or indirect involvement in human trafficking, money laundering, fraud, financing terrorism, or other malfeasance. Nor does it want the negative press coverage that might result from such connections.

Part of the challenge is that financial institutions aren’t always aware of the sanctions placed upon current and potential customers, vendors, or other third parties. That’s why adverse media and sanctions screening is a necessary part of any public record research. But if this type of know-your customer (KYC)or know-your-vendor — due diligence is done improperly and incompletely, your institution can be hit with fines exceeding several million dollars. And the fallout can linger beyond the expense. It can give your institution a black eye that can take a long time to heal. That, of course, can mean lost customers and lost revenue, neither of which you can afford in today’s highly competitive banking environment.

But again, it’s arduous and time-consuming to uncover any negative press about those parties. What’s more, the information that is available isn’t always accurate or complete. How can you feel confident that you’re protecting your institution from potentially catastrophic risks involving current and potential business partners?

Screening challenges

In addition to identifying sanctioned individuals and organizations, financial institutions need to be aware of any current or potential business partners falling under the category of “politically exposed person” (PEP). The Financial Action Task Force, a global organization that battles international money laundering and terrorist financing, defines a PEP as “someone who currently is, or has previously been, entrusted with a prominent function.” Examples of PEPs include current or former government officials, high-ranking military officers, and senior executives of foreign government-owned commercial enterprises. Because of their political positions, PEPs are considered higher risks for engaging for corruption, money laundering, terrorist financing, and bribery.

But as you and your team have discovered, adverse media screening can be mind-bogglingly complicated, labor-intensive, and time-consuming. It can require checking innumerable news feeds, websites, and other online sources such as social media channels, blogs, and watchlists, databases, often in multiple languages.

Search engines? They can be helpful. They also have significant limitations. Search requests typically return a very large number of results, many of which may not be relevant to your risk mitigation efforts. This requires your team of analysts to manually scan those results for potential adverse media mentions. They often have difficulty determining what media reports might raise red flags about a customer or vendor. And, of course, not all online sources can be trusted. There’s plenty of misinformation out there.

You’ve probably faced other challenges involved with adverse media screening. Finding and keeping qualified investigators, for one. Another is keeping up with sanctions lists, which are continually updated.

A new approach

To meet these critical due diligence challenges, you and your compliance and onboarding officers need a tool that can automate the process of evaluating current and potential clients, suppliers, and vendors for any exposure for fraud. This tool should allow your team to conduct adverse media and sanctions, PEPs, and SOEs screening in minutes, not hours.

The rise of powerful AI-driven solutions can free your team from costly, time-consuming manual screening by automating searches for adverse media reports. Automated screening also can dig deep into sources worldwide, picking up negative media coverage that might not have attracted the attention of larger news agencies. One such solution is Thomson Reuters CLEAR Adverse Media Sanctions, a one-stop platform for investigating web and news media and Sanctions, PEPs, and SOEs. It allows investigators to quickly access and evaluate the most up-to-date information on PEPs and state-owned entities, as well as any damaging media coverage associated with a current or potential customer or vendor.

Learn more about and how AI-powered adverse media screening can protect you and your financial institution by clicking this link.

Thomson Reuters is not a consumer reporting agency and none of its services or the data contained therein constitute a ‘consumer report’ as such term is defined in the Federal Fair Credit Reporting Act (FCRA), 15 U.S.C. sec. 1681 et seq. The data provided to you may not be used as a factor in consumer debt collection decisioning, establishing a consumer’s eligibility for credit, insurance, employment, government benefits, or housing, or for any other purpose authorized under the FCRA. By accessing one of our services, you agree not to use the service or data for any purpose authorized under the FCRA or in relation to taking an adverse action relating to a consumer application.

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