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Sanctions Screening in AML Programs: Questions to Ask

As financial institutions (FIs) strive to maintain effective Anti-Money Laundering (AML) programs, one critical component is sanctions screening. With the ever-evolving nature of sanctions and watchlists, it’s essential for FIs to ensure their screening processes are robust and compliant.

Are You Using the Right Risk Reference Data?

Financial institutions with varying risk profiles require tailored sanctions lists. Tier-one financial institutions on Wall Street may face different sanctions challenges than small banks in Canada. It’s crucial to understand your institution’s unique risk profile and adapt your sanctions screening accordingly.

• Consider the following:
  • Are you using a single, comprehensive risk reference data set or multiple sources?
  • Is your data set updated regularly to reflect changes in sanctions and watchlists?

Do You Review Narrative Sanctions?

Narrative sanctions, which list criteria for inclusion rather than specific individuals or entities, pose a challenge for FIs. These non-listed entities must be screened against to ensure compliance with AML regulations.

• Consider the following:
  • Are you screening narrative sanctions regularly?
  • Do you have a process in place to identify and report matches?

Are You Using Law Enforcement and Adverse Media Data?

In addition to traditional watchlists, law enforcement agencies like Interpol, Europol, and the FBI provide valuable information on FATF predicate offenses. Adverse media data can also help identify individuals or entities involved in illicit activities.

• Consider the following:
  • Are you leveraging law enforcement and adverse media data in your sanctions screening?
  • Do you have a process in place to incorporate this data into your AML program?

How Do You Manage PEPs and State- Owned Entities?

Financial institutions must have a policy for handling Politically Exposed Persons (PEPs) and state-owned entities. This includes identifying and screening these entities to prevent money laundering and terrorist financing.

• Consider the following:
  • Are you implementing enhanced due diligence on high-risk customers, including PEPs and state-owned entities?
  • Do you have a process in place for reporting suspicious activity related to these entities?

Have You Configured Your Screening Software for a Risk-Based Approach?

Optimize your screening software to catch high-risk individuals by using various factors, including date of birth information, address verification, and other data points.

• Consider the following:
  • Are you using risk-based screening to focus on high-risk customers?
  • Do you have a process in place to regularly review and update your screening criteria?

How Do You Perform Independent Testing of Your AML Program?

Regular independent testing is crucial to ensure the effectiveness of your AML program. Consider the following key aspects: independence, frequency, qualifications, coverage, and reporting when evaluating your testing program.

• Consider the following:
  • Are you conducting regular independent testing of your AML program?
  • Do you have a process in place for addressing findings and implementing corrective actions?

What Technology Tools Are You Using in Your AML Compliance Program?

Technology can significantly streamline compliance processes. Leverage software solutions for customer identification, due diligence, sanctions screening, transaction monitoring, suspicious activity detection, and regulatory reporting to reduce manual work and maintain effective control.

• Consider the following:
  • Are you using technology to automate manual tasks and improve efficiency in your AML program?
  • Do you have a plan in place for implementing new technologies and updating existing ones?

By asking these questions and implementing effective solutions, financial institutions can proactively mitigate risk and maintain a robust AML program.