What constitutes an accurate global watchlist check? It may be an indispensable process to maintain regulatory compliance, but there are many parts to this. According to Anthony Thompson, CEO of Compliance Technologies, “Watchlist screening is the bedrock of any effective risk management or sanctions compliance program. Getting it right is critical for avoiding unintended consequences.” This will call for the gathering of sufficient customer identification details by financial institutions in order to perform such screening.
It begins with knowledge of key identifiers such as name, address, and date of birth. This article will break down what information you need to conduct a proper global watchlist check. Keep reading to learn best practices for address verification and name matching and how to make this process easier through the use of technology.
What is a Global Watchlist?
A global watchlist is a consolidated list of names of individuals and entities that are the targets of international economic sanctions. These lists emanate from various regulatory bodies like OFAC, UN, and EU, against which a financial institution has to screen its customers in order to be compliant with anti-money laundering and combating the financing of terrorism. Global watchlist checks are processes wherein the customer names are run against these lists, including the SDN list from OFAC. It is of far-reaching criticality that proper watchlist screening is performed to identify any potential matches, whether static or dynamic.
Why is Accuracy Important?
Financial institutions must conduct global watchlist screening as required. Gaps or inaccuracies in the screening can result in non-compliance with sanctions and serious legal penalties. Wrong checks can facilitate the entry of a criminal individual or group into the financial system undetected. This enhances risks and regulatory problems down the line. Dynamic watchlist screening is only as good as the quality of data and identifiers being matched against. One of the most important things that may undermine a watchlisting system’s integrity is the need for more accuracy.
Required Customer Information
Any global watchlist checks and screenings are performed based on the minimum required information regarding the customer from all financial institutions. They have to collect and, at a minimum, verify the following details of every customer: surname, first name, date of birth, and address. Only complete or accurate data will ensure an institution’s ability to perform vital watchlist screening in accordance with regulatory obligations. According to different studies, incomplete or inaccurate data leads to a 15% increase in compliance risks for financial institutions in 2023.
Address Verification Sources
It’s important to verify customer address information when obtaining data against known trusted third-party sources. Precise name and location details are what greatly help dynamically allow watchlist screening to occur. Many tools can be used to assist financial institutions in verifying the addresses their customers provide. For instance, LexisNexis and MicroBilt offer services in identity verification and global address databases. This extra verification can prevent potential mismatches later on when their names are screened against AML Watchlists or during a search in a worldwide watchlist screening. These services have helped cut down address verification errors by some 20% in 2022.
Variation in Name Search
This is separate from the requirement to collect a full legal name from a customer. Financial institutions should also consider orderly variations of names at the time of watchlist screening. The individual may use some other form of his name which is different from the one imprinted on his government ID. It is in this regard that dynamic watchlist screening comes in handy because it allows for slight spelling differences to ensure better matching.
This could be achieved by searching for similar names or with variations, such as initials instead of full first names. Such are innocuous differences in names that may let potential matches fall through the radar in the global watchlist screening exercise. Institutionalizing searches for initials rather than full first names has raised the rate of matches in global watchlist screenings by up to 30%.
Watchlist Data Quality
This makes the quality of regulator watchlist data very important for accurate global watchlist screening. If any financial institution is to screen against its customer database comprehensively, then the AML watchlists and sanction lists used in screening must be updated without an end. Stale information on watchlists may result in false negatives in the global watchlist screening process. Real-time data feeds ensure the most complete and effective results.
Automation Technology
Conducting correct global watchlist screening searches against all customers, new and old alike, currently means a colossal process that is performed entirely by hand. There are several automated screening solutions that financial institutions have now used to speed up the AML watchlist compliance workflow. These technologies interface directly with customer databases, permitting a background process of continuous monitoring; this, in turn, allows for seamless global watchlist checks without tying up valuable compliance resources. Finally, reach out to one of our experts in compliance for a flexible proposal for how we may assist your organization in the realization of the highest accuracy levels and being current on changes in the regulations.
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