The ‘Absence of Suspicion’ – Why You Need to Batch Screen Your Customers

Customer screening is one of those things that regulators and law enforcement agents like, because it is very easy to prove when you have not done it properly. It is a little bit like drink driving…

…you get pulled over, you blow into the box and the light either goes red or it stays green, it’s very binary and there are no arguments. In a positive case, there is no evidential burden beyond the light turning red that law enforcement needs to overcome, and it is very much the same with customer screening. You have either screened the customer in the appropriate way, or you have not.

When to Screen Customers

There are various points at which you should screen your customers across the customer lifecycle:

  1. Pre-Onboarding – Before you initially meet with that potential customer for the first time. This means that your business developers should undertake screening before they go to meet prospective clients (your ‘first line of defence’).
  2. During Onboarding – Customers are screened using a manual ‘point’ system at the onboarding stage of the relationship
  3. Review Stage – Again customers are manually screened, the depth and frequency of which depends on the level of risk ascribed to each customer (the risk-based approach).
  4. Ongoing Monitoring (Batch Screening) – Customers’ risk profiles should be monitored on an ongoing basis in between the review points in the customer lifecycle process. This can be achieved by automatically uploading a list (or ‘batch’) of your customer names to a screening engine so that they are automatically screened against global sanctions lists, government watch lists and PEPs databases on an ongoing basis.

Why Batch Screen Your Customers?

There is a real risk of being caught out by a change in the risk status of your customer going undetected. The objective of batch screening your entire customer base on a daily basis is to ensure that businesses are alerted to changes in the status or risk profile of their customers at the earliest possible opportunity.

The advantages of this are that it protects your business against any allegation that could be levelled against it to say that it should have known or had a ‘suspicion’ in relation to a customer or group of customers. This is important because regulators and prosecutors have something that you can never have – the benefit of hindsight.

When they come knocking and ask ‘Did you know that you are doing business with someone who is on a government watchlist, and was placed on that watchlist 3 months ago?’ and your response is, ‘No we didn’t’, how are you going to explain yourself? How are you going to demonstrate that the ‘absence of concern’ on your part, about that customer, was reasonable in all the circumstances? And keep in mind that, what is ‘reasonable’ in all the circumstances will depend, in large, on the risk profile of that customer.

The Advantages of Using a Batch Screening Technology

Batch screening in an automated process, one that doesn’t have the enormous resource headache associated with manual screening. You are relying on the technology to conduct the screening analysis on your behalf every single day. So there are real implications in terms of time-savings gain for your business. Batch screening is dynamic and real time. As discussed, there are real dangers associated with relying wholly on a manual review-based screening process in that you may only discover something materially wrong with the customer relationship too late. Now that batch screening technology is available regulators look much less favourably on those who have been trading with someone who was evidently added to a government watch list 3 months ago and the business failed to pick up on this. With a batch screening engine you would be alerted to this the same day.

Case Study

A small Trust Company Business (TCB) did not batch screen its customers. Instead it conducted screening at customer take on and then conducted manual screening annually for high risk customers and less frequently for lower risk clients.

One of their clients was added to a Government Watchlist in February 2016 but the TCB was oblivious to that until he was manually screened in March 2017.

Consequently the TCB was subjected to a full regulatory investigation the purpose of which was to ascertain whether the absence of suspicion by the TCB about the client was reasonable. The TCB was subjected to a fine and a Public statement only narrowly avoiding prosecution for breaching the Money Laundering Regulations.

You do not want to learn of a change in customer risk profile only at the point of review. Given the speed at which things can change in relation to the risk of your customer-base, can you afford to not batch screen your customers?




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