When it comes to preventing financial crime such as anti-money laundering, organizations need to make use of a customer screening process that takes human errors into account – Let’s dig deeper!
A financial crime and compliance management (FCCM) solution have many components and steps, but as a whole, it is designed to prevent, detect, investigate, and report financial criminal activities in an organization.
On top of deterring and addressing financial crimes, FCCM solutions are meant to ensure that financial establishments are compliant with the rules set by the various regulatory bodies that govern their existence and operations.
Taking precautions against criminal activities, improving their anti-money laundering (AML) efforts, and complying with regulatory guidelines give financial institutions the best chance of avoiding sanctions, hefty fines, and scandals that can tarnish their reputation within the industry.
This is why many organizations make every effort to ensure that their compliance AML solutions remain up-to-date with the latest guidelines set by regulatory bodies.
One of the first steps in preventing financial crime is customer screening. Banks and other financial institutions take on risks with every customer that they accept, and as such, it’s imperative that they screen each and every customer—individuals and organizations alike—before they make their products and services available to them.
A robust customer screening process allows financial organizations to detect customers that bring a high level of risk with them, such as those that have a history of being involved in financial criminal activities or those that have been linked with suspicious groups and personalities.
This is one of the first steps in deterring financial crimes and preventing an organization from hosting such activities. Here is how a compliance AML solution with a strong customer screening process can make the task easier for banking, insurance services, and financial companies:
Prioritize Customers According to the Level of Risk
There are many factors that determine the level of risk that each customer brings with them. Banks need to scrutinize each and every application that they receive to ensure that they do not take on risks that exceed acceptable thresholds.
However, financial institutions also need to deal with a large number of applications for their products and services on a daily basis and examining these applications can take a lot of time and resources.
An AML solution with an effective customer screening function can hasten this process a great deal. It will simplify know-your-customer operations by categorizing each application and customer according to the level of risk that they bring to the company.
Customers that bring higher risk levels—those that have been linked to questionable deals and groups in the past, for example—may be subjected to higher levels of scrutiny compared to customers with fewer risk factors. This allows the financial institution to devote their resources to examining cases with higher levels of threat, all without delaying the processing of applications that bring little risk to the company.
Increase the Accuracy of the Screening Process
A customer screening process that makes use of poor data sources can lead to a high number of false-positive results, and this can prevent the financial organization from properly identifying risk factors and customers that bring higher levels of threat. Poor data sources can include incomplete watch lists or those that are riddled with typographic errors, misspellings, and inaccuracies.
To get around these hurdles, financial organizations need to make use of a customer screening process that takes human errors into account. An effective compliance AML solution not only matches exact information; it also makes use of advanced matching algorithms.
This enables the screening process to use multiple databases and watchlists, catch name and data variations, and compare and contrast different customer profiles that present similar elements and details.
Screen Prospective Customers in Real-Time
As mentioned before, screening customers properly can take a lot of time, and it isn’t advantageous for financial institutions to accumulate backlogs in their screening process. This will not only increase their risk for missing vital signs that point to financial crime, but it will also slow down their response to the legitimate customers who want to use their products and services.
Fortunately, customer screening software capable of processing customer applications as they come in have become more widely available. The capability to screen customer information in real-time will empower banks and other financial organizations to speed up their internal processes without compromising the integrity of their FCCM efforts.
The general public may perceive finance as a relatively safe and stable industry, but the truth of the matter is that banking, financial services, and insurance companies face plenty of risks in their day-to-day operations.
Institutions need to take a systematic approach to prevent financial crimes such as money laundering, fraud, terrorist financing, and bribery and corruption, to name a few, from taking place within their organization. A strong customer screening process is a good precursor to a highly efficient and effective end-to-end FCCM solution.
This not only deters criminals from attempting to infiltrate financial organizations; it also reduces a company’s risk of incurring fines and losing the confidence of the financial industry and the greater community.