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Institutions Face Urgency to Expand AML and Watchlist Screening

Financial Crimes

Craig Willis


Fritz Lehman



As economic sanctions escalate over the conflict between Russia and Ukraine, banks face renewed pressure to know their customers. Fail to recognize the wrong name in your database, and your institution not only runs the risk of incurring heavy fines, but . you’re also in danger of significantly harming your bank’s worldwide reputation by being associated with criminal activity.

Your institution depends on remaining in tune with the watchlists identifying individuals under sanctions or legal inquiry. You need to thoroughly vet prospective customers in the context of the world well beyond your bank’s location. At any given time, you’re responsible for monitoring the latest watchlists from hundreds of governments around the globe. Unfortunately, if you’re relying on conventional transaction monitoring and watchlist screening, your efforts will soon be overwhelmed by data.

Fortunately, just as the rapid pace of technology has made data management more challenging, its evolution has also supplied a solution. Along with protecting your organization’s competitive standing, a data modernization initiative facilitates regulatory compliance through watchlist screening that’s fast, accurate, and automated.

Watchlist Screening Is No Longer Only a Concern for Big Banks

For financial institutions looking to reduce risk when onboarding new accounts, a next-level approach to customer due diligence is critical. Banks need to screen dozens of new, clients on any given day. Each individual must be cross-referenced against watchlists of suspected criminals and politically exposed persons (PEPs).  

PEPs are individuals who hold prominent public positions either domestically or overseas, such as high-ranking politicians or heads of state. PEPs can hold a lot of influence over critical matters such as government contracts and oversight, and the potential for corruption is high. Consequently, business associates and family members of government and political figures are also categorized on international watchlists.

In broad terms, someone who was a PEP before the ongoing crisis in Ukraine hasn’t changed status overnight. A PEP is always a PEP. However, with the introduction of new economic sanctions, you need to incorporate multiple rounds of screening into your onboarding process and ensure your watchlists reflect the latest international policies.

Institutions Need Cost-Effective and Efficient Watchlist Solutions

When it comes to verifying customer identity for small- to midsize institutions, cost eventually becomes a factor. Information conglomerates such as Refinitiv, Thomson Reuters, and Lexis/Nexis compile watchlists from multiple nations and international agencies. But they charge an expensive license fee dictated by your number of transactions, the size of your institution, or other metrics. As global conditions grow more complex, the investment of time and money associated with conducting due diligence grows higher.

Consequently, some institutions fall short with their screening process. Regulators have issued close to $36 billion in fines related to banks in violation since the great depression. AML failures in 2019 were estimated at $6.2 billion, at an average of $143.5 million per fine. If anything, failing to fully vet your customers is more costly than subscribing to a watchlist service.

Plus, the growth of digital banks, remittance providers, and other fintech specialty firms has only expanded the possibilities for illegal behavior. Changes to technology and how digital banking has evolved have underscored the need for better AML and sanction screening. The stakes are simply too high to view in-depth customer analysis as a priority for only the biggest institutions.

API Connections and a New Payment Model Optimizes Customer Screenings

Once your bank’s approach to data has undergone a digital transformation, your institution’s options expand when it comes to screening new customers. Many services have responded to demand for automation by including API integrations for their license-holders. Aver is among those offering the same capabilities along with more expansive options that should appeal to smaller institutions.

Rather than allowing your bank’s screening capabilities to be limited by its information provider, Aver compiles over 150 watchlists. When your institution calls Aver’s API for a screening, you gain the assurance of cross-checking multiple lists without added costs. Plus, the company is flexible enough to respond to the needs of its clients. If there’s a watchlist your bank needs to check that is not on their list, they’ll add it to their roster.

When I was a customer of major players in the identity provider space, I recognized that the pricing model was broken and outdated. Today, major identity verification providers are still using pricing models and tools that should have evolved with the introduction of cloud and pay-as-you-go services. Our goal at Aver is to change the model. We offer the same pricing and technology to a startup as we do to the largest financial institutions.

Stephen Hyduchak

CEO at Aver

Aver is also more cost-effective than the payment model used by other providers. Rather than being responsible for a long-term licensing fee, your institution only pays for what it uses. Depending on the volume of new customers your bank needs to verify in a time period, Aver offers a more affordable solution for startups and smaller institutions. If you need to crosscheck 1,000 customers, you’ll only pay for 1,000 screenings.

As demand continues to grow for efficient, API-enabled watchlist solutions, the number of providers will increase. ComplyAdvantage, Bottomline, and Melissa are just a few tools offering faster customer onboarding with AML and sanction compliance.

Crypto Introduces Complications for Regulators

Beyond initial due diligence, the number of screenings your company executes depends on its appetite for risk. For example, the cryptocurrency space remains a work-in-progress from a regulatory standpoint, and customer privacy is often part of the appeal. While some firms may be comfortable with that level of ambiguity, others will at least opt for initial screenings to verify their business partners.

Companies adhering to those norms while emphasizing a frictionless customer experience will have different standards of due diligence than a regional credit union. And more importantly, they’ll have fewer concerns about compliance — for now.

Effective Watchlist Screening Relies on Digital Transformation

The rapid pace of change in the financial industry overwhelms the tools institutions relied on 20 years ago. From understanding and maintaining your transaction data to automating the watchlist screening that protects your bank’s business, traditional storage and analysis models can’t keep up.

Public API’s  and automated processes to increase accurate screening results and minimize false positives are among the vital benefits of a successful modernization effort. Your institution needs to incorporate the latest technologies into its data stack to take advantage of the latest screening technologies. But software and storage alone won’t be enough to upgrade your AML solution.

To keep pace with such a rapidly changing industry and political climate, you face an urgent need to ensure your bank’s capabilities are advanced, up-to-date, and optimized to suit its needs. Ultimately, your institution may not be able to afford the alternative.

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