1. STEP 1. SCREEN.

a. The primary function of any screening programme is to provide an end-to-end process for matching an individual or entity against entries on global sanctions, enforcement and PEP lists. However, the major issue that often impacts such a screening programme is the volume of false positives generated by screening software applications.
b. The system may report possible matches when customer or third-party information is the same or similar to watch list entity information such as an individual with the same name or similar address as an entity on a watch list.
c.  Reviewing and processing false positives can quickly become a significant business burden given the rapid accumulation of such search mis-hits as the screening programme repeatedly reruns searches to meet the regulatory demands of on-going monitoring. Left unchecked a sub-standard screening process can quickly generate hundreds of thousands of false positives, all requiring review by an increasing number of compliance analysts and at a rising cost to the firm.
d. To avoid such a problem, it is important to properly test and calibrate the matching rules applied to the screening software at implementation, ensure the lists checked are prioritised accordingly and to regularly review the screening process to account for any changes in a firm’s risk-based approach and business strategy etc.

2. STEP 2. MONITOR.

a.  In recent years, thematic reviews from the Financial Conduct Authority have focused on the lack of effective enhanced on-going monitoring of high risk and correspondent relationships leading to subsequent enforcement actions where failings in firms’ systems and controls in this area have been called out.
b.  The FCA emphasises that conducting enhanced due diligence alone is not sufficient and regulated firms should maintain an awareness of potential risks:
i. “Firms should conduct enhanced due diligence (EDD) and enhanced on-going monitoring in higher-risk situations. Situations that present a higher money-laundering risk might include, but are not restricted to, customers linked to higher-risk countries or business sectors; or who have unnecessarily complex or opaque beneficial ownership structures; and transactions which are unusual, lack an obvious economic or lawful purpose, are complex or large or might lend themselves to anonymity.”
c.  In line with the revised FATF recommendations, text focused on enhanced monitoring is also currently being considered in a series of amendments drafted for the Joint Money Laundering Steering Group Guidance.
d. Scrutiny of such processes is likely to intensify as the FCA Systematic Anti-Money Laundering Programme (SAMLP) to supervise AML compliance becomes increasingly implemented.

3. STEP 3. Protect.

a.  Firms have long recognised the obvious importance of protecting hard earned business reputations and brand image.
b.  To a large extent, understanding a firm’s regulatory obligations and implementing systems and controls to comply with such obligations are also now taken as a given. The increasing scrutiny of anti-bribery & corruption controls and the rise in related enforcement activity have also led to such policies being recognised as a prerequisite for conducting business.
c. The above drivers remain key. However, implementing a robust and consistent process to manage such increasing regulatory obligations and the associated tasks they generate is also important as firms look to comply with evolving and new rules but also ensure the business can continue to operate effectively.
d. As anti-money laundering, anti-bribery & corruption, PEP and watch list screening tasks converge through legislation, industry guidance and best practice, due diligence and screening processes follow.

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