Screening is a key part of KYC due diligence and plays a vital role in ensuring your organization is compliant with anti-money laundering (AML) regulations, protected from fraudulent activity and confident in the corporate structures of the customers you’re looking to onboard. We explore the need for an efficient KYC screening process and how to use technology to streamline activities and bolster compliance.
When onboarding a new corporate customer or financial counterparty, banks, firms and financial institutions must perform KYC due diligence and screening, while building a profile of the organization’s structure. The aim is to identify any issues and protect them against any activity that could lead to financial or reputational damage.
KYC screening involves checking any relevant individuals and entities identified in a corporate ownership structure against sanctions, adverse media, enforcements and politically exposed persons (PEPs) lists to proactively determine the suitability of working with them and to manage risk.
With increasing pressure from regulators on financial institutions to actively monitor customers, comprehensive screening is essential for remaining compliant. However, a robust KYC screening process can involve checking large numbers of third-party databases and sources to determine the risk posed by a customer - many of which regularly change.
Outside of the realm of KYC conducted as part of customer onboarding, banks typically have large departments involved in screening enormous volumes of transactions, who already use automation to reduce the time and resources required. With the added workload of the global sanctions, PEP and adverse media screening required at onboarding, it’s crucial to leverage modern technology and reliable data sources to improve efficiency, coverage and compliance .
The KYC screening process covers a range of categories that examine a customer’s potential risk from multiple sources to effectively catch potential exposure and minimize the chance of reputational, financial or fiduciary damage.
As part of the due diligence process, banks will check any relevant individuals and entities identified in a corporate ownership structure for associated risks in public sources. Screening is conducted against global PEPs, sanctions and adverse media lists to determine whether they’re in line with the organization’s policy and risk-based approach.
A politically exposed person, or PEP, is an individual who is considered at a higher chance of being involved in bribery, intimidation or corruption due to holding a prominent position of influence. This can include foreign or domestic officials, high-ranking parties within state-owned enterprises, and their family members and associates.
These individuals pose a higher threat of being involved in illegal activity, such as money laundering and terrorism financing, therefore posing a greater risk to financial institutions. PEP screening looks to quantify that risk and assess to what extent it conforms with target profiles.
Sanctions screening is the process of screening individuals or companies against specific sanction lists created by national governments to detect any parties who have been officially censured. Monitoring these types of high-risk individuals is essential to avoid reputational and commercial damage caused by non-compliance or the association with illicit trade activities.
Adverse media screening involves the analysis of third-party data and news sources for negative news associated with an individual or company. Negative news coverage of a potential customer could lead to associated reputational damage to the financial institution or a loss of customer trust.
Your KYC screening process is all about gathering data from various sources and gauging potential risks.
The fast-changing nature of sanctions, as well the complications of monitoring new entities, sectors and activities, poses serious challenges for compliance teams trying to keep up with current lists and policies for effective ongoing monitoring.
In the current climate, regulations can change almost daily, putting extra pressure on teams to update policies and processes, and monitor customer data. In this data-heavy environment, manual sanctions screening processes will limit your efficiency and increase your risks.
Find out more about how you can create an agile KYC screening process to effectively identify and mitigate sanctions risk in our on-demand webinar, Spotlight on sanctions.
Enhanced sanctions regulations, like the OFAC and EU 50 Percent Rule, mean that bank sanctions screening must now be extended to the individuals and entities that ultimately own or control an organization.
Since financial institutions are required by regulations to search through their client databases and transaction flows to detect any potential violations any time regulations change, banks are at risk of either falling behind on their compliance obligations or expending significant resources in remaining on top of global sanctions screening. This can leave banks and financial institutions at risk of high penalties and reputational damage from negative news surrounding AML compliance breaches.
The sanctions screening process involves screening individuals, groups or companies against designated sanction lists according to where the screening organization is trading, as well as the currencies, partnerships and alliances they are involved with.
Sanctions screening requirements include:
Checking for any sanctions alerts on the individual
Augmenting existing data with lists of sanctions relevant terms, names or phrases related to the individual in question
Given the changing nature of sanctions, many businesses now partner with sanctions screening services to more effectively aggregate, assess and analyze sanctions data from multiple sources. By working with a broader data set and a specialist provider, banks can spread risk and reduce the risk of falling behind on sanctions information and procedures.
As the KYC screening process becomes not only more complex but more crucial for compliance, a new generation of digital KYC tools has appeared on the market to streamline the data, sourcing, process and analysis requirements of modern screening duties.
Key tools for a technology-driven KYC screening process include:
KYC screening involves checking relevant parties against a large volume of data sources. Automation can streamline the process, checking large data volumes instantly and accurately.
APIs enable direct connection to trusted data sources, available via a single connection to the Encompass platform, greatly expanding the pool of available data for financial institutions when researching individuals or organizations.
Modern PEP, adverse media and sanctions screening software is streamlining the traditional screening workflow with intelligent automation and data integration. By connecting banks directly to accurate, up-to-date, searchable data sources, these tools can save significant time on global sanctions screening while reducing the scope for human error.
Encompass’ KYC screening tools and automation software integrate hundreds of trusted data sources and leverage intelligent automation to save your business time and money, while fulfilling AML screening and compliance obligations.
Due to the large amount of data and verification that’s involved in screening potential customers, banks and businesses are increasingly turning to technology-assisted systems to automate the KYC screening process. Encompass uses automation to enable an end-to-end KYC process, including smart retrieval and integration of data and documents for AML and KYC requirements.
The Encompass platform’s KYC screening tools connect your systems to all required data providers and our automation features, without the need to build/maintain multiple data integrations, to transform time-consuming and manual screening processes.
Our screening solution uses automation to ensure that relevant parties are always screened against the most appropriate data sets, for consistent KYC across an entire customer base.
The Encompass platform goes beyond enhancing your KYC screening process to streamline all KYC activities. Find out more about how Encompass works and how we can help your business succeed.
Encompass partners with more industry-leading KYC data providers than any other solution. Our customers use our on-demand platform to search across trusted KYC data from global primary and premium sources covering over 200 jurisdictions.
By putting the right data in your hands, we help you screen customers with peace of mind, backed by seamless integrations and customer visibility for your KYC screening process and AML compliance requirements.
Our powerful KYC software provides significant time and cost savings for organizations, and reduces regulatory and reputational risk.
Find out how our platform works and why automated due diligence dramatically improves efficiency and compliance.
Our flexible KYC screening software enables global financial institutions to benefit from enhanced efficiency, in-depth visibility and end-to-end data connectivity across customer profiles.
Our powerful KYC software provides significant time and cost savings for organizations, and reduces regulatory and reputational risk. Our clients include respected corporate, business and challenger banks. Explore our KYC automation case studies to learn about the impact we've created for our clients.
Encompass provides KYC screening software for banks and leading financial institutions across the globe. Watch our video below, in which representatives from Santander discuss working with Encompass and how our digital solutions have transformed the bank’s customer onboarding process.
To learn more about the impact we’ve created for businesses with our KYC automation platform, check out our case study library.
Encompass works with leading financial institutions worldwide to analyze processes, improve efficiency and leverage technology to create a competitive advantage through time savings and innovative risk management solutions.
If you’d like more information about any of the topics discussed on this page, including how you can create a modern, future-proof KYC screening process, get in touch with the Encompass team.
If you’d like to book an in-depth session with Encompass to discuss how our KYC due diligence software can help you stay compliant and competitive, you can request a free consultation tailored to your specific business needs. Just fill out the form below.