Watchlists

What are Watchlists?

Records and documents that comprise information about entities that pose a significant risk to financial organizations are known as watchlists. Oftentimes, these lists include names of criminals, designated officials, Politically Exposed Persons (PEPs), and those assigned with a high public role. Below is listed a collection of watchlists that corporate and financial institutions use to screen onboarding customers:

Specially Designated Nationals and Blocked Persons List (SDN)

The Office of Foreign Assets Control (OFAC) is responsible for maintaining the watchlist for specially designated nationals and those blocked under specific jurisdictions. The SDN list also consists of entities and persons that belong to specific high-risk countries such as North Korea and Iran. People notorious for narcotics, arson, terrorist-related activities (funding and organized crime), cross-border trafficking of humans, drugs and luxury items. 

Such individuals have their assets blocked as per regulations set by financial regulators, and US-based companies are prohibited to carry out business dealings with them. 

Specially Designated Global Terrorist (SDGT) Lists 

As per the definition provided by OFAC, a specially designated global terrorist is an entity that has an evident criminal background. These persons or groups are categorised as global extremist entities posing a serious risk to financial and public institutions. The SDGT watchlist is published in an Executive Order by the Department of Treasury of the US aiming at empowering Countering the Financing of Terrorism (CFT) activities around the globe. 

OFSI Consolidated Lists

The UK’s HM Treasury runs the Office of Financial Sanctions Implementation (OFSI) which has published watchlists and sanction lists. These records contain information about frozen accounts, consolidated assets and investment banks operating in the United Kingdom. 

UN Sanctions

The Security Council of the United Nations maintains a list for targeted sanctions compiling different rules and regulations applicable for high-risk entities. This watchlist comprises trade and economic guidelines, certain restrictions and exemptions, financial bans, travel limitations and details about enforcing embargoes. Using these defined documents, governments and organisations can mitigate terrorist funding, human right violations, the use of weapons of mass destruction, thereby safeguarding the legal financial system. 

What are Source of Watchlists?

Watchlist screening is an integral part of AML verification through which financial organisations can significantly identify and take down financial crime and its perpetrators. Following are some sources which are used to compile watchlists for AML screening of potential customers.

• Politically Exposed Persons (PEP) lists
• Sanction lists and consolidated lists published by OFAC and the European Union 
• Greylists and blacklists published by the Financial Action Task Force (FATF) containing information about non-cooperative jurisdictions
• Lists maintained using data provided by independent authorities and supervisory bodies such as FINMA and the SEC 
• International databases maintained by Interpol, Europol, and other law enforcements
• Exit Control List (ECL) and denied individuals lists 

How can Business Perform Watchlist Screening? 

Screening numerous customers on a daily basis often becomes a challenge for enterprises. Performing quick and efficient search operations through the sheer amount of watchlists is time-consuming which directly impacts the experience during user onboarding procedures. 

While fulfilling AML compliance is mandatory for financial institutions, they need to come up with quick and efficient solutions to address this problem. Shufti offers automated AML screening solutions to quickly identify high-risk customers, so your businesses can categorise them according to different risk profiles, ultimately reducing illegitimate and suspicious entities from associating with businesses.  

Suggested Reads:

AML Screening in the light of Compliance Regimes Around the Globe
High-Risk Transactions – How Can Enhanced Due Diligence (EDD) Help?