Watchlist screening : A complete tool to apply RBA to your business

Watchlist screening : A complete tool to apply RBA to your business

Given the widespread financial crimes such as money laundering, terrorist financing, embezzlement, corporate fraud, corruption, bribery and so forth, international regulatory bodies and law enforcement agencies are compelled to bring on stringent regulatory guidelines such as Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements for the financial industry to follow. When it comes to financial crimes, financial firms stand at the forefront in the financial crime landscape. Regardless of working on a domestic or international level, a financial firm must have watchlist screening solutions at hand that covers all corners of the world. 

What Constitutes Watchlists?

Watchlists are computerized records of individuals, groups and organizations that may be taking part in illegal activities like money laundering and terrorist financing and require risk based approach by financial firms due to legal and political grounds. It also comprises a list of politically exposed persons (people sitting in the corridors of power and hold immense social and economic power), individuals with scandalous reputation due to unfavorable adverse media as well as sanctioned individuals, groups, organizations and countries. 

Why Watchlist Screening Is Mandated For Financial Institutions?

Financial firms are prohibited to develop any business relationship with clients involved in financial crimes such as money laundering and terrorist financing. They are held accountable by the regulatory bodies and law enforcement agencies for providing financial services to criminals and facilitating their crimes. Being an accomplice in financial crimes comes with massive repercussions. A financial firm cannot afford to neglect Anti-Money Laundering compliance protocols like AML watchlist screening, adverse media screening, pep screening, and sanction screening. Reason is that initiating a business relationship with a criminal client could embroil the financial firm itself in damaging political and financial scandals. 

Watchlist Sources From Around the Globe

Watchlists are composed and systemized by the global cooperation of international regulatory bodies, law enforcement agencies and various government organizations in order to protect the integrity of the global monetary system.

 

Some of the credible sources of watchlists are as follows:

  • Watchlist data provided by the International Criminal Police Organization, also known as Interpol, world’s biggest crime petrol organization. 
  • Watchlist data provided by United States’ state specific agencies. 
  • Watchlist database provided by U.S Securities and Exchange Commission (SEC)
  • Watchlist Data issued by the Swiss Financial Market Supervisory Authority (FINMA), a Swiss financial regulatory government agency.
  • Watchlist data published by greylists and blacklists of high-risk countries notorious for money laundering by the Financial Action Task Force (FATF)
  • Politically Exposed Persons (PEP) List published by various government agencies and private enterprises. 
  • Denied Persons List published by the U.S Department of Commerce
  • Exit Control Lists issued by various countries across the world also helps to determine high risk individuals. 

 

Hundreds of crime and sanctions watchlists by the above mentioned regulatory bodies and law enforcement agencies from all across the world are updated everyday. Staying on top of all those updates is indispensable for a firm’s stable financial health. 

Non-Compliance of Watchlist Screening Requirement

The illicit flow of funds in the legitimate financial system facilitates financial crimes. Financial crimes like money laundering, corruption, bribery, embezzlement of state funds, human trafficking, corporate frauds, tax evasion, smuggling of weapons & drugs and terrorist financing tend to hurt economies across the globe and have adverse macroeconomics loss. Every single year, financial crimes end up causing billions to trillions of financial loss for the world economy which resultantly widens the societal wealth gap causing political instability across countries and which results in unstable economies and high poverty rates. Facilitating financial crimes by the big financial institutions affects the livelihoods of a country’s middle class.

 

The indirect costs of being accomplice to financial crimes causes massive damages to the integrity of the international monetary system as well as government agencies, and regulatory bodies. Facilitating terrorist financing ends up destabilizing the whole country, causing the displacement of millions of innocent individuals and loss of infrastructure as well as precious lives as in the case of ISIS in Iraq and Syria. It not just threatens international peace but also propels the economic progress of nations multiple decades backward.

 

Therefore, there is a reason why government agencies of all countries and international regulatory bodies such as the Financial Action Task Force (FATF) spend millions of dollars in implementing financial regulations to prevent financial crimes that disrupt the whole society. 

Given the financial fraudsters elevating their deceptive strategies to exploit the regulatory system, the wisest approach for the financial firms would be to equip themselves with a watchlist screening tool in order to deter the risks of engaging with suspicious clients and paying the price later.

alexpetter

alexpetter

Leave a Reply

Your email address will not be published. Required fields are marked *