Screenings and Such
Conducting a background check on a potential customer or employee is nothing new. To add an additional layer of comfort and trust when onboarding a new relationship, various background checks are essential in solidifying what we perceive to be a legitimate person to interact with professionally. Once, a simple police record or reference letter would be sufficient, however, increased emphasis on background checks including sanction screenings have become paramount to the onboarding process. There are endless resources for conducting a screening on an individual or company, but there are many factors to consider when selecting one or more of the resources available.
The process of conducting screening in an anti-money laundering (AML) program is to identify any potentially negative information that may present risk or harm to the organization. The screening process is achieved by applying known information about the client against databases or resources related to sanctions, crimes, adverse media, politically exposed persons and much more. The information is quite vast. Organizations could seek to screen information manually or through a screening database. In either case, the organization must be acutely aware of the types of information sources that are being used to screen customers and employees.
Sanctions. The number one concern for most organizations is sanctions primarily as these are enacted into local legislation. There is also often consideration of what other jurisdictions have listed as a sanctioned person or country depending on the organization’s geographical connection or their customer’s geographical connections. Have you ever taken a look at the OFAC list of sanctioned persons and countries? How about HM Treasury’s Office UK Sanction list? It could potentially be a waste of an organization’s time to manually search against these lists to ensure that a customer or employee is not included. As sanctions can be applied for political, economical, human rights (more so in recent years) and other types, the list of persons, countries and transactions are numerous in nature, often varying degrees of complexity. Hence the greater gravitation towards employing services that maintain the database for which screenings are conducted or hiring specialists to provide advice. In these cases, it is essential that the resources utilized are vetted by the compliance department to ensure the local regulatory requirements are met.
Criminal acts. Honestly, a simple Google search may do the trick. Any significant cases are often made public and a police report is not always necessary but does add a layer of legitimacy. Even if an official police report or sanction screening report is attained, I would definitely encourage where possible a simple online search of the information provided by the client. Typically the name and their country or employment would suffice to result in a positive match.
Adverse media. This too can be achieved by conducting an online search. However, I would dare to go further if no results are found. Unlike a criminal search, if you are simply looking for any adverse information, social media searches are an option to ascertain social circles. Adverse media is not only in direct relation to the customer but also related to persons they associate with. This would not necessarily discredit the customer, but it would aid in grasping a bigger picture of the customer.
Politically exposed persons (PEP). This is by far, in my opinion, the most difficult search to conduct. Depending on your jurisdiction this person could include association with a PEP, a retired PEP, an influential leader, a government contract and the list goes on. Information like this is not readily available. Screening for this could potentially be captured in the onboarding application that the customer completes. This requires trusting and relying on the customer rather than a third party. Screening could include a search of a purchased database or an online search. Depending on the size of your community, it could even be well known local knowledge. It is quite a frustrating process for most to feel confident that PEPs are identified. It is therefore important to record results and date it to prove at least at the time of the last screening that the client is or is not a PEP, especially in the latter case.
Other screenings relied on could potentially be a reference letter as it should provide background information on an individual. While it is still a viable option for employees, it is less consistent on the accessibility of a professional organization such as a bank or accountancy firm to provide a personal character reference letter to another professional organization. Often many of the references letters, I’ve seen are set as a template with very generic information. It would probably still be available to ultra-high net worth individuals who have a personal banker or accountant but I’ve generally turned away from such reference letters unless of course my employer requires or prefers it. There is nothing wrong with the reference letter, it is an added comfort, but it doesn’t generally provide substantial information.
The decision to use one or all of these screening options are subject to the organization’s risk-based approach as documented in their risk assessment. It is essential to ensure that the options are applied with a balance between reducing risk, managing cost, and upholding an efficient process. Some of the sanction screening providers I’ve regularly used or used through a demo include Safetynet, RiskScreen, LexusNexus Risk Solutions and Refinitiv WorldCheck. These are just a few of the options out there. There are also companies that offer specialised consultancy services and one-off consults such as Efficient Frontiers International. As screenings are heavily relied on, extensive research and consideration must be conducted to ensure the best screening process is implemented into your AML program. Shell Compliance engages with many different sanction screening providers and would be a good regulatory compliance consulting firm to provide guidance and support in navigating the appropriate provider.
