Why monitoring matters

When it comes to putting a comprehensive, robust and reliable anti-money laundering programme in place, customer due diligence - verification checks and screening - are absolutely vital.

As part of their required customer due diligence, regulated business in the UK need to verify every customer they work with to ascertain three things:

1.      If the person is legitimate

2.      If the identification (ID) documents they are providing are legitimate

3.      If the individual and the ID documents match

Once an individual has been verified, they then need to be screened against Politically Exposed Person (PEP) and sanctions lists to ascertain the level of risk - if any - doing business with that person poses to the business.

When this process has been completed, and the checks have shown the person to pose no risk, the business can go ahead and onboard that customer.

However, this is just the first part of the process; due diligence obligations do not end there. For regulated firms to fully meet their legal AML obligations, they must also have a comprehensive customer monitoring system in place.

This means that to remain compliant, the business must regularly check their customer database for any changes that could impact the risk posed to the business, for example, a customer becomes more vulnerable to bribery - either as a PEP themselves, or someone who is closely associated with a PEP, known as RCAs (Relatives and Close Associates), or they become a SIP (Special Interest Person) as a result of being convicted - or arrested or on trial - for a financial or serious crime.

Regular monitoring of customers and their status can be difficult for businesses to manage - especially when they are still relying on manual AML checks. Not only because it is hard to keep on top of, but it is also difficult not to get bogged down by false positives.

The easiest way to keep on top of regular customer monitoring, and reduce false positives, is to use an automatic global PEP and sanctions checking service.

This technology is able to screen an entire customer database every night against global Watchlists, which includes information about PEPs, RCAs, SIPs and sanctions information, that is updated continually. Each customer on the database can be screened against these lists, so if a customer is identified as a PEP, or other high-risk person, or has sanctions against them. Furthermore, the technology can run enhanced due diligence on any matches to remove false positives and reduce any unnecessary action.

Martin Cheek, Managing Director of SmartSearch - a leading AML platform with automatic screening and monitoring, said: It is virtually impossible to run proper customer monitoring using manual processes. Not only is it incredibly time-consuming, but there are so many different resources that it is unfeasible for a firm to be checking every single one regularly enough for the monitoring to be a true indication of risk.

“The only way that regulated firms can be sure that they are meeting their customer monitoring obligations is to automate. Our ongoing monitoring service is supported by the Dow Jones Factiva Watchlist which comprises of more than 1,100 worldwide Sanction and PEP lists. Our system takes updates from the list every night and our efficient and innovative data matching processes work to greatly minimize the number of false positives returned so that our customers are only alerted when a true match is made.”

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