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Protecting banks through cloud-based sanction screening solutions

Posted on October 1, 2018

Principal Program Manager, Banking and Capital Markets

At a previous position, I owned the software and hardware testing across a 6,000-branch network for a large fortune 100 bank in the U.S. The complexity and sophistication of the end-to-end delivery of products and services to existing customers was daunting. Vetting new, potential customers while simultaneously building a new system was tough. Especially since the new system had to balance a pleasant front-end user experience with the backend processes from strong Know Your Customer (KYC) scrubbing (in other words, due diligence). That backend system was invisible, batch-based, and only had post-transaction look back capability. I learned that banks can have their cake and eat it too, but the business implications of limiting user friction are not trivial, and properly vetting customers puts a lot of pressure on the technology capabilities.

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As a compliment to my online and mobile fraud theme this quarter see Detecting Online and Mobile Fraud with AI, I’ll provide some insights on how banks are seeking to rationalize and simplify security and compliance processes in real-time. The path stretches from the device to the network and back-end infrastructure. The goal is to ease the burden on employees and reduce costs from fines. Specifically, the requirements to screen customers and transactions against a variety of sanctions lists places a burden on banks. The remedy is “sanction screening.” That means vetting customer databases, payments, and other transactions for individuals or organizations that are on government-managed sanctions lists.

Banks should seriously consider cloud-based technology screening solutions that provide these features:

  • Industry-leading protection that screens against multiple watch lists
  • Intelligent, adaptive lexical screening that enhances security
  • The lowest rate of false positive alerts in the industry
  • Precise, real-time screening that is simple to use
  • Intuitive alert management tools to streamline operations
  • Accessible insights with graphical dashboards showing risk levels
  • Seamless integration with multiple business systems
  • Open technology and flexible configuration options
  • Broad cloud compliance that meets a range of international and national standards (Azure meets more than any other cloud)
  • Best-in-class cloud protection that embeds security and privacy in every step

As you consider moving to real-time sanction screening, look for detection and decision engines that are precise, fast, easy to configure, and simple to use. The technology should include features that continually evolve and adapt to new classes of items to screen — ensuring banks prevent terror and criminal financing with best-in-class tools. The solution must demonstrate the ability to achieve low rates of false positives alerts with accurate algorithms. Lower rates mean lower costs from redundant validation.

From an operational perspective, the solution needs to have flexible configuration options enabling agile, cost-effective implementations. If the solution has thoughtful, ‘out-of-the-box’ defaults for customer and transaction screening, it’s a bonus. Focus on these areas: Information Collection, Monitoring, Alert Investigation, Case Management and Reporting, Policy Definition and Implementation, and IT Support for Sanctions.

Client onboarding is a critical area to have efficient sanction competencies, but unfortunately, many banks are still collecting KYC information and documents from the customer in-branch web/mainframe systems and/or good old paper forms. Digital transformation demands sanction functionality at the online banking and mobile banking tiers and needs to include the broader view of how prospects and customers matriculate across the disparate banking systems.

As the volume of electronic payments continues to rise in line with new digital channels, so does financial crime. Financial institutions have the burden of: (1) keeping up to date with embargoed countries, (2) evolving sanctions regulations, and (3) complying with frequently updated lists and procedures. Regulators are cracking down harder, and record-breaking fines are levied more frequently. Without the right software to adapt to the multitude of changing lists and rules, these fines (and worse), will continue.

Want to know about other areas of financial crime, like online and mobile fraud? First read Detecting Online and Mobile Fraud with AI Use Case providing actionable recommendations and solutions, then engage with the author on this topic by reaching out to me on Twitter and Linkedin.