Regulatory bodies across the world keep a close eye on the people who have committed severe crimes related to money laundering and terror financing. They also set many regulations for business and strictly comply with the business companies to follow AML regulations. In case your business fails to comply with these regulations, there is a high chance that the bodies will impose a fine or business sanctions on your organization. To avoid such difficulties, organizations need to screen their client’s data against different sanctions lists such as PEPs, Sanctions list Screening, global watchlists, and Adverse Media screenings.
During the screening process, if you see the screening tool has detected the individual or business against the information you provided. It will prompt an alert that indicates that the individual could be a high-risk entity that in the near future may be involved in financial crimes. so, before making any deal with such an entity, businesses need to thoroughly examine their profile.
In this blog, we will talk about the benefits a timely screening alert can help businesses, the impact of false positives, and best practices for choosing reliable AML software that prompts danger in the first place.
5 Ways Screening Alerts Can Help Business Mitigate Money Laundering
Sanction screening alerts are crucial for the financial industry because they help them detect risk in the first place. However, If you are using traditional ways of screening, there are high possibility that you probably miss the essential alerts. Unlike traditional screening ways, the automated sanction list screening is more accurate and minimizes the chances of false positives. And alerts on such queries that are actually high-risk entities. The role of these alerts can be broken down into several key areas:
1. Detects the High-Risk Transactions
Criminals try to exploit the banking sectors to launder illegal money, and due to noncompliance the institutions often face penalties. However, with the initial screening alerts, organizations can detect transactions easily that pose some risk or that connect with the people that are sanctioned. By flagging these transactions, organizations can prevent money launder and terror financing.
2. Prevention of Regulatory Breaches
Every business is obliged to follow AML compliance to combat Money laundering and other financial crimes. A business that fails to follow these rules ends with fines or sanctions. Sanction Screening alerts can play a face-saving part for any company owing to its capability of showing the alert even before reaching any deal. It helps businesses to make an informed decision, depending on the risk level, either stop the transaction, proceed, or block it.
3. Risk Decision Making
As soon as an alert is generated against any transaction, it prompts a review process for businesses where designated compliance officers in every organization assess the risk associated with suspicious transactions. These alerts are for businesses to make informed decisions about whether the suspected transaction should continue, be blocked, or be rejected.
4. Protecting Reputation
Companies’ growth highly depends on the reputation they build in the market. And this is an area where they always invest more and remain updated with adverse media screening. Business with good reputations has more chances of getting trusted and reliable clients. Sanction screening alerts help protect financial institutions by preventing association with high-risk or illegal activities.
5. Compliance with Legal Obligations
The best part is that it ensures that the financial institution is complying with the regulatory bodies’ regulations and not violating any law. This compliance is not just about avoiding penalties but also about fulfilling corporate social responsibilities.
Alerts that prompt during the screening process are signs of risk that an entity can pose either in the form of money laundering or related crimes. This helps businesses to identify and respond to such alerts quickly to ensure that the institution operates within the legal framework and maintains its integrity in the financial system.
The Problem of False Positives for Financial Institutions
Every organization strives to get potential clients. And as per the AML regulations, businesses also need to follow these regulations. But despite investing in costly screening tools, they often come up with false positive results. False positive results can cause a huge loss for business. Therefore, businesses need to invest in tools that are reliable and have a minimum false-positive ratio.
Choosing the right AML Sanction Screening Software for Your Business
as we discussed in the earlier part of this writing how false positives can harm the business operation and also increase the chances of losing potential clients. The false positive results often pop up due to AML sanction screening tools’ inefficiency which can cause business reputational damage. To avoid such false positives, businesses need to integrate AML software that complies with international bodies’ regulations and minimize the chances of false positives. AML Watcher is one such Tool, that has its own set of data collected from a couple of thousands of sanctions lists, PEPs, watch lists, and Adverse media screening.
