You have to carry out ongoing monitoring as part of your Know Your Customer (KYC) obligations, and there are many solutions available to help you comply - but not all solutions are created equal.
In fact, here are five areas where you’ll find most of the market’s ongoing monitoring solutions lacking.
Too many false positives
Every customer flagged as either being on a sanctions or Politically Exposed Persons (PEPs) list has to be manually reviewed.
Those who fail to properly screen for PEPs and sanctions face serious penalties.
More than one penalty was issued every week in 2019, collectively costing those involved more than $8bn USD. That’s around twice as many penalties (29) and double the fines ($4.27bn) issued in 2018.
When the consequences of non-compliance are so serious, you need to thoroughly review every positive match – even when a match ends up being a false positive.
Many ongoing monitoring solutions return too many false positives, wasting your time and resources that could be better spent elsewhere – for example, investigating customers who genuinely pose a risk to your organisation and could be overlooked in a fog of false flags.
Creating the opposite problem, many ongoing monitoring solutions return false negatives because they don’t leverage enough quality data to catch every customer on a PEPs or sanctions list.
And there are a lot of listed individuals to catch. Globally, there are more than 33,000 sanctioned individuals and more than 11,500 sanctioned businesses. What’s more, there are more than 1.5million Politically Exposed Persons (PEPs).
Every customer that your ongoing monitoring solution fails to flag as a threat (because it doesn’t harness the right data) puts you at serious risk of penalties from regulators.
No clear audit trail
It’s not enough to just do your due diligence, you also must evidence it.
Any good ongoing monitoring solution will capture an audit trail for your customers as they are screened. Many other offerings come up short when the auditors come knocking because they take too much time and effort to use.
An audit trail needs to be clear, easily and readily accessible, thorough and simple to use. Then, if your organisation does come under scrutiny, you can be confident that you’ve not only met your obligations, you’ve also got clear and robust record-keeping to prove it.
Many ongoing monitoring solutions offer limited or no control over your matching criteria, simply matching against everything and potentially flagging issues your organisation doesn’t really care about.
This is a drain on your resources, since you won’t know a match is irrelevant until you spend man hours reviewing your matches.
The most effective and efficient monitoring solutions allow you to customise your matching criteria to fit your risk-based approach – whether that’s matching and investigating all cases or tailored to your individual company’s internal processes. All of this delivered without the need for your IT function needing to get involved.
Over-reliance on tech
Good technology should be at the heart of your KYC programme, but that doesn’t mean there’s no place for human intervention. In fact, some ongoing monitoring solutions are over-reliant on technology to the point where false positives are flagged.
For example, if a John Smith is featured in the media for his efforts in fighting fraud, some ongoing monitoring solution tech may flag him as a (false) positive after recognising the coverage but not contextualising it.
Human reviewers can easily understand the context of the coverage and appreciate that John Smith is, in fact, not someone to flag. The best ongoing monitoring solutions combine tech and manual intervention.