What sources should I screen against?
Unless businesses in your sector and jurisdiction are required by regulators or the law to screen against a specific set of sources, we recommend screening all customers against PEP lists, sanctions, and watch lists at a minimum.
Politically Exposed Persons
Politically Exposed Persons (PEPs) are individuals who hold or have held a significant public function. This function might give them influence over, for example, the spending of taxpayer money or the allocation of contracts by state owned enterprises. As such, they are regarded by the Financial Action Task Force as a category of individuals which is more susceptible than most to engaging in bribery and corruption, and money laundering activity.
Screening providers maintain databases of millions of global PEPs, including family members and known associates. Nearly all jurisdictions require their regulated sectors to establish if applicants for business are PEPs.
Individual countries and multinational bodies (e.g. the EU and the UN) impose sanctions measures to pressure other countries or organisations to change their behaviour. Sanctions can apply to individuals, specific businesses or whole nations. Breaching a sanctions measure, or assisting another party to do so, is nearly always a criminal offence. Businesses must scan customers against sanctions lists issued by all the jurisdictions in which they are operating or to which they have operational links, in addition to lists issued by multinational bodies.
In the wake of the 9/11 attacks, the US has developed economic sanctions into a sophisticated tool for conducting what some commentators have described as ‘financial warfare’ against actors that threaten the country’s interests. Leveraging the status of the US dollar as the world’s de facto reserve currency, the US Treasury aggressively pursues organisations that, knowingly or not, help individuals and nations get round US sanctions. In 2014, French bank BNP Paribas agreed to pay a record fine of nearly $9 billion for breaching US sanctions against Iran, Cuba and Sudan. As such, any businesses which make use of the US dollar, even if they have no other connection to the US, would be well advised to comply with US sanctions measures.
Watch lists or black lists are official lists of individuals and legal persons which may pose a greater financial crime risk owing to their past behaviour. They may include lists of wanted criminals or suspects, lists of persons disqualified from holding directorships or holding executive positions in the finance industry or lists of persons convicted of particular crimes. Watch lists don’t capture every criminal offence and are not a comprehensive source for criminal records.
RiskScreen tracks over 4,000 global watch lists maintained by bodies ranging from Interpol to national financial regulators and prosecutors.
Transaction screening involves injecting a check, either automatically or manually, into the process of sending funds from one place to another. The remitter of funds, the recipient, or both, are screened against the categories explained above (which categories specifically depends on the business and the risk profile of the customers in question, but usually PEPs, sanctions and watch lists as a minimum).
Transaction screening is a binary check: if all parties involved pass the screening, the transaction goes ahead. If any fail, the transaction is held subject to review and escalation.
Transaction screening serves as a final stage check for businesses to ensure that they are not themselves transmitting, or are not facilitating the transmission of, funds between entities that represent a regulatory or reputational risk.
Screening an individual for adverse media coverage involves looking for any negative mentions of them in traditional news media and publically available information more broadly. Adverse media screening could reveal that, for example, a potential customer was convicted of a criminal offence, but not one deemed sufficiently relevant to financial crime to merit inclusion on a watch list. In some jurisdictions, adverse media screening is reserved for enhanced due diligence checks –but it is good practice to carry out basic adverse media screening for all customers, particularly as it can reveal information not included on official sanctions, PEP and watch lists.
Electronic identity verification (eIDV)
Electronic identity verification, or eIDV, involves taking steps to confirm a customer’s identity by conducting electronic checks on his identity documents.
However, the tools currently available for ID verification are of limited use and can easily be circumvented by basic forgery techniques. When onboarding a customer, there is no substitute for obtaining and inspecting original identity documents or adequately certified copies of original documents.