Watchlist AML screening is the process where businesses check customers against predetermined risk factor records. These listicles include high-risk companies, sanctioned entities, suspected terrorists, Politically Exposed Persons (PEPs), and criminals involved in the flow of dirty money. Watchlists are not just any document with easy access, they are created, maintained, and updated by governments.
Regulatory Enforcement List (REL), Profile of Interest (POI), Disqualified Director (DD), Reputation Risk Exposure (RRE), and many others count as Anti-Money Laundering watchlists. Businesses under the direct supervision of law enforcers face scrutiny due to compliance status. Furthermore, challenges range from inefficient watchlist data management, restricted access, and loopholes in screening.
This article covers reasons why businesses need AML compliance solutions and how they help them steer clear of legal obligations.
A Detailed Abstract of Watchlists and their Internationally Accepted Types
According to the global AML legal standards, watchlist screening is a crucial component of compliance programs. It refers to checking individuals’ status against the risk of financial crimes. Anti-money laundering watchlists search offers identification of high-risk customers and businesses alike. Most commonly, industries like finance, virtual currencies, agriculture, and healthcare use this check for secure operations.
Most Widely Accepted Watchlists
Watchlists include PEPs, the EU Consolidated Sanctions List, Interpol’s Red Notice, and the FBI’s Most Wanted & Fugitives. Governments, international regulators, and lawmakers are caretakers of these records, making them a reliable option in risk assessment.
- FBI’s Most Wanted and Fugitives
- Financial Crimes Enforcement Network (FinCEN) watchlists
- The list issued by the State Secretariat for Economic Affairs (SECO) of Switzerland
- Interpol Red Notices
- EU Consolidated Sanctions List
Regulations that Back AML Screening of Watchlists
Almost every business falls under regulatory obligations depending on its area of origin, nature of services, and risk of criminal threats. Therefore, industries should make necessary efforts to stay compliant. They should have adequate and robust AML monitoring checks to identify corrupt, sanctioned, and criminal entities.
Watchlist screening, being an integral part of AML compliance programs, is backed by major regulations from across the globe that involves the following:
European Union (EU)’s Directives
The EU has 27 member countries and its regulations reside over every region equally. In order to combat the increasing threat of money laundering, which accounts for 5% of the global GDP, it has been continuously tossing new obligations in the framework. From the First Anti-Money Laundering Directive (AMLD) enforced in 1991 to 2021’s 6AMLD, the EU’s efforts have now seen around three decades.
Along with other AML verification requirements, the EU also emphasized watchlist screening. In its 5AMLD, there was some leniency, but 6AMLD came with stringent obligations followed by hefty penalties.
Financial Action Task Force (FATF)’s Recommendations
Similar to the EU, FATF has also set out certain requirements for screening customers against global watchlists. Recommendation 12 defines PEPs and mandates businesses to ensure their customers do not fall under this category.
Reasons Why AML Watchlist Search Cannot be Left Unattended
Businesses should screen customers during digital onboarding to look for criminal, corrupt, blacklisted, and sanctioned entities. Otherwise, they will face not only AML compliance risks but also reputational damages. Further reasons why businesses must adhere to watchlist screening requirements include the following:
Prevent Becoming an Instrument in Illicit Actions
Criminals often target businesses that have operations spread across different regions. This helps them escape anti-money laundering radar and move their dirty money across clean channels. However, with effective watchlist screening, businesses can cross-check customers’ status and restrict services to risky entities.
Inefficient watchlist screening, outdated data sources, delayed access to records, and onboarding of risk-possessed entities collectively drive businesses to AML compliance risks. Due to stringent obligations, enterprises also face hefty penalties in case of violation. However, efficient and automated watchlist screening helps businesses stay compliant.
Reputational Damage and Ending Up on Sanctions
Reputational damage is another concern for businesses which is directly proportional to increased criminal activities and reduced compliance. Similarly, heightened anti money laundering compliance risks put industries under sanction, which is a global restriction in terms of operations. Therefore, active watchlist AML screening is what businesses should use to prevent these consequences.
In the End
As watchlist screening becomes a stringent obligation, businesses should consider investing in automated AML solutions. These AI-powered fraud prevention services streamline customer search, accelerate risk assessment, and run ongoing monitoring for unforeseen consequences prevention. Due to their reliance on mathematical algorithms, AML security solution reduces friction whilst optimising workflow.
AML solutions offer easy access to global watchlists, run thorough risk assessment checks, provide error-free results, and help businesses save their integrity.