Watchlist screening best practices
Our world today can be unpredictable. Therefore, in depth knowledge of who you are selling to or doing business with is crucial. By screening even just a small portion of any know your customer (KYC) or know your visitor (KYV) database, you are more likely to likely to detect a potential threat and protect your organization from bad intentions later.
Watchlists serve the purpose of assessing that clients’ potential risk and contains securities monitored for potential trading or investing opportunities. Investors track the list to analyze price movements and spot trading opportunities.
Most organizations are legally bound to screen their business partners against restricted or denied party lists flagged by governments and institutions like the United Nations or World Bank. Law enforcement agencies, security authorities, national and regional agencies also disseminate various lists. These lists (e.g. Interpol’s Red Notices, the FBI’s Crime Alert List, Singapore Investors Alert and IOSCO consumer protection) can help an organization from doing business with a wrong party and from being drawn into a fraudulent scheme.
A common belief implies that screening for those on a watchlist is only about finding a name on a list. However, there are many challenges and inconsistencies that make screening a very difficult task to perform. Following these best practices when it comes to watchlist screening will help assess a clients’ potential risk and keep your facility and business secure.
- Build a database on the principals of good data – making sure names are properly spelled, sound data structure, and easy-to-read format will go a long way to improving the identity matching process.
- Live your risk assessment, not just perform it – this is critical in leveraging the understanding of how these risk exposures impact technological decisions and operational areas of the institution.
- Test, test, test – perform random checks to ensure that technology and operational processes are working appropriately and are being consistently applied. Review reports for changes and understands why those changes occurred.
- Maintain records – institutions must provide evidence both for the adequacy of the risk assessment, policies, procedures, and technology, but also the actual remediation/resolution activities each customer. A clear path from risk to policy to implementation to action will provide confidence to regulators.
Instant watchlist screening tools have the ability to deliver a comprehensive, and easy-to-read solution to traditional watchlist screenings. This enables your business to confidently complete initial screening and conduct ongoing monitoring across the customer relationship.
Tools like FedCheck, provide that instant ability for restricted party screenings to help simplify this process – improving vendor compliance and reducing the cost and effort of third-party due diligence. Understanding exactly who your prospective customers or visitors are and proactively identifying the risks they may pose to your business is imperative in today’s global landscape.