Watchlist Screening

Individuals placed on watchlists are potentially those involved in money laundering and financial crime. Watchlist entries may also include information about traffickers notorious for cross-border smuggling of humans and hard cash, terrorists, and those dealing in weapons of mass destruction.

What is Watchlist Screening?

Watchlists are electronically available records that consist of information and profiles of politically exposed persons (PEPs), individuals notorious in adverse media, and those belonging to high-risk countries, criminals involved in money laundering, and malicious cyber actors. Governments and transnational agencies work together to compile watchlists at a global level so that when organizations and enterprises wish to associate ties with potential clients, they can screen these certain high-risk individuals against these sanction lists.

Watch list screening is part of every AML compliance program that a business develops to protect its financial integrity and develop a trusted customer base. Watchlist screening is particularly useful in the financial industry where banks and insurance companies come across a large volume of fraudsters attempting to bypass the regulatory system.

What are Watchlist Sources?

AML screening solutions used by financial institutions (FIs) fetch precise data stored on multiple sources, some of which are:

• List of sanctions published by the Office of Foreign Assets Control (OFAC) and the consolidated lists by the European Union (EU)
• Databases maintained by Interpol and other inter-governmental and state-specific agencies
• Information provided by supervisory authorities and independent regulatory bodies such as the SEC and FINMA
• FATF’s greylists and blacklists containing the names of non-cooperative countries that are infamous for money laundering. Individuals belonging to these countries are identified as high-risk
• Lists that contain information about Politically Exposed Persons (PEPs) around the globe
• Denied Individuals Lists
• Exit Control Lists (ECLs)

How Does Watchlist Screening Work?

Watchlist screening is an effective source of conducting a reliable identity verification against a customer. An AML program of a financial organization takes into account all necessary information from a wide array of watchlist sources to perform a comprehensive screening of the customer. The client’s name is screened against the data provided in the lists to identify if they are a criminal, have any related associations, or hold some kind of public authority. This allows corporate entities to key out the level of risk and the nature of services the client will receive or not.

Why is Watchlist Screening Essential?

Quick and Efficient Operations
With automated AML solutions, watchlists screening can be performed in relatively lesser time. This reduces customer onboarding delays due to manual screening procedures which are a burden for compliance teams.

Conformity with Compliance Updates
If a certain watchlist is updated, the FI gets a notification receiving the modified changes. This way they can keep up with state-of-the-art AML and KYC verification protocols.

AML Compliance
Watchlist screening enables organizations and enterprises to comply with Anti Money Laundering obligations set forth by financial regulators.

Better Due Diligence
Customer Due Diligence procedures can be fine-tuned by utilizing data from watchlists for an effective risk profiling of customers.

Deterrence Against Fraud
Watchlist screening acts as a first line of defence against all kinds of digital identity theft fraud, criminal groups, reduces the false positive rate during Enhanced Due Diligence checks, and allows enterprises to create a better brand image in the market.

Automated Watchlist Screening is the Way Forward

Manual screening through hundred of watchlists often becomes a challenge not only for financial institutions but for customers as well. Oftentimes, these manual checks come at the expense of compromised customer experience and human errors that make AML compliance harder to fulfil. To allow businesses to meet these regulatory needs and to stay one step ahead of bad actors, Shufti utilizes information from more than 1700 watchlists that are updated every fifteen minutes. The automated AML screening solution is quick and allows foolproof verification of prospective clients which enables financial institutions to breeze through compliance regulations.

Suggested Reads:

AML Screening in the light of Compliance Regimes Around the Globe

A Comprehensive Guide to AML Compliance