Top 5 Reasons Sanction Screening Checks Are Essential for Businesses in 2024
Is your business ready to face the hidden threats of Money laundering and Terrorist Financing in 2024?
If we look back at the last decade, we will see how, in the last 10 years, Money laundering activities have significantly threatened the global financial system’s integrity.
And you know what the most concerning thing about money laundering is? Money laundering isn’t a single crime; various other criminal activities are directly associated with it, such as terrorist financing, corruption, fraud, embezzlement, and human and drug trafficking.
To prevent businesses from interacting with such criminal entities, international regulatory bodies closely monitor people involved in illegal activities and impose various sanctions on them.
What do they do with such people? After imposing the sanction on the target entities, The bodies make the sanctions list public and oblige every business to have the lists of these sanctions bodies and not to do business deals with those listed in sanctions checklists.
What if business or financial institutions do not screen their customers against the checklists?
This blog will answer the question of why sanctions screening checks are essential for businesses in 2024 and provide the best practices for conducting a comprehensive screening process to avoid any economic or reputational damage.
Is there any difference between sanctions screening checks and sanctions screening checklists?
The distinction between these two concepts is substantial. When we talk about Sanction screening checklists, often called sanction screening lists, they are actually a compilation of people and entities subject to restrictions and bans from regulatory bodies.
On the other hand, screening checks are quite different in nature, checks are the process and procedures that businesses opt to cross-reference their dealings against these sanctions just to follow AML regulations.
Major Global Sanctions Checklists
Every business must screen various global sanctions lists against new customers while onboarding them. It is also recommended that screening of existing customers be conducted for a better compliance program.
· United Nations sanction list
· European Union sanction list
· OFAC sanction list
· UK sanction List
· FinCen
· World Bank
Top Five Reasons Your Business Must Conduct Sanction Screening Checks
Let’s start with a question. If you are running or an employee of a financial institution, apart from providing tremendous services to your customers, what would be your top priority? Wouldn’t it protect the organization from any scandal or corruption?
It will, and it must because financial institutions are more prone to exposure to money laundering, terrorist financing, corruption, fraud, and embezzlement.
Financial organizations must conduct sanction screening checks on all their new and existing customers for the following reasons.
- Regulatory Compliance
Complying with AML regulations is essential for businesses, and avoiding them can result in millions of dollars in fines and penalties. Sanctions screening checks are part of a compliance program.
With sanctions screening services in place, businesses can ensure they are not engaging with any entity or individual sanctioned by any regulatory body.
- Risk Management
Applying adequate checks on all existing and new clients helps businesses assess their risk level. Ultimately, this allows companies to avoid exposure to money laundering and other criminal activities.
If an organization finds any transaction or entity involved in such a crime, the company has the right to freeze its assets and accounts.
- Protect Business from Reputational Damage
Maintaining trust and reputation is essential for any business than any other business matter.
What better way to build this trust than applying sanctions checks to ensure enterprises never allow any destructive entity to use their channel? A good reputation means higher growth chances.
- Operational Efficiency
Proper screening checks can enhance businesses’ operational efficiency in many ways.
However, companies must implement an automated screening process to avoid workload and false positives.
Detecting and reporting unusual transactions, mitigating risks, and saving cost, time, and resources are some expected benefits businesses can have with automated screening checks.
- Customer Onboarding
Every institution has prioritized onboarding the maximum number of customers, which can also threaten businesses.
However, according to the AML compliance program recommendations, companies can make the onboarding process seamless and efficient by implementing online sanctions screening checks.
What do regulatory bodies say about sanction screening?
As per the FATF recommendation, every business must follow the AML regulations to avoid disruption, and the sanction screening checklist is part of that.
The Bank Secrecy Act, which mainly works to improve the global financial system, obliges businesses not to let any entity go unscreened, nor should any financial transaction be unscreened.
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