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The Importance of conducting AML Screening

Bachir El-Nakib, Founder Compliance Alert LLC 

The importance of conducting Anti-Mmoney Laundering screening online and offline 

Q)What due diligence do you perform for customers who are exporters, freight forwarders, shippers etc? What documents are requested at onboarding? Do you perform periodic reviews (meaning do you consider these companies higher risk for money laundering)? Do the countries shipped to affect your diligence procedures (meaning OFAC or FATF rated higher risk countries get more diligence)?

A) Exporters, forwarders, shippers (regardless the type of customer) are required to complete the normal KYC process by providing documentation for identification and verification (POI/Proof of Address/ Business registration, license), during KYC process we are able to identify the type of customer and business scale, based on that info we can evaluate if we require periodic reviews. Periodic reviews can be recommended if we identified risks associated with the country of origin of the products, negative news, or complex business structures for large businesses, or other risks that put the financial system at risk.

However, keep in mind that we need to follow the regulatory guidance of each country, jurisdiction and the AML program of the institution in where the customer will be onboarded. If we know our customer and their activities, we will have more chances to mitigate risks and concerns. All legitimate business are officially registered and are able to demonstrate their activities throughofficial documents; In addition, their presence and existence can be consulted through their official websites, and social pages which will give you more information about their activities, reviews, claims, contact details, location, and do not forget that the screening process is one of the most important phases of the review.

The primary objective of AML screening is to detect and prevent fraudulent activities, including illegal transactions, money laundering, and terrorism financing.

This goal can be broken down into three main parts:

A)Conducting risk assessments. 

The screening process involves evaluating the risk associated with customers and transactions to identify potential suspicious activities and high-risk customers.

B)Avoiding sanctions violations. 

AML screening helps ensure that transactions comply with international sanctions and regulatory requirements, preventing any inadvertent involvement with sanctioned entities or countries.

C)Protecting against regulatory fines. 

By implementing effective AML screening measures, businesses and financial institutions can safeguard themselves from potential fines and penalties imposed for non-compliance with AML regulations.

Not just sanctions lists but also other wanted lists must be checked during AML screening. 

High-risk customers are considered to be politically exposed persons (PEPs), which have their own lists due to being exposed to a higher risk of money laundering. PEPs have connections and can be linked to financial crimes, such as bribery and corruption. 

So, in general, financial institutions and other regulated industries must conduct Anti-Mmoney Laundering screening on their customers to:

1) determine their risk level and,

2) prevent doing business with risky individuals, such as sanctioned entities, PEPs, etc. 

When to Conduct AML Screening?

Companies conduct Anti-Mmoney Laundering screening right at the account opening stage of the customer onboarding process to proactively prevent fraud before it has a chance to occur. However, there are other cases when AML screening must be performed on customers:

1)During sanctions list updates. 

Companies must conduct AML screening whenever there are updates to sanctions lists to ensure compliance with the latest regulations and restrictions.

2)When starting third-party relationships.

Collaborating with third-party vendors, suppliers, or partners means that companies should perform AML screening to assess the risk associated with these external entities.

3)Companies are also obligated to conduct AML screening for the Ultimate Beneficial Owners (UBOs) and collect register Beneficial Owners Information (BOIs) of any firm they engage in business with.

4)When dealing with large transactions. 

Businesses often screen and scrutinize large or unusual transactions to ensure they are legitimate and not indicative of money laundering or other illicit activities.

But risk levels change over time, turning AML screening not into a one-time thing but rather a continuous process. So even after a customer has opened an account and completed the onboarding process, the AML screening doesn’t stop.

High-Risk Suspicious Activity During AML Screening

Companies need to frequently monitor customer activities and transactions to detect any suspicious behavior or changes in risk profiles over time. This helps ensure that the risk assessment remains up-to-date and aligns with any changes in the customer’s circumstances.

This infographic of AML Singapore is of great importance, which every MLRO should take it into consideration because it deals with the top nine deficiencies around the sanctions screening performed by the regulated entities. Financial Institutions, Designated Non-Financial Businesses and Professions, and must consider whether the countries they deal with, are subject to Targeted Financial Sanctions (TFS).

Further, they also need to check that the entities and individuals they deal with are not sanctioned entities or individuals. Often, these checks are not correctly made, exposing the entity to ML/TF risks and regulatory fines and penalties.

1. Inadequate Evidence


Failure to maintain records of sanction screenings carried out.

Solution: Use sanction screening software that maintains records of sanctions screening carried out on a fresh and ongoing basis.

2. No Ongoing Sanctions Screening


Failure in screening of individuals and entities against the latest and relevant sanctions lists on an ongoing basis

Solution: Implement a screening software that supports scheduled automated screening of customers on a daily basis, and the feature is turned ON.

3. Failure to Conduct On-time Screening


No sanctions screening is conducted before customer onboarding or before establishing a business relationship.

Solution: Make on-time sanctions screening a part of your AML compliance program and train front-line employees accordingly.

4. Sanctions List Data Quality


Conducting sanctions screening through unreliable or secondary sources not issued by authority.

Solution: Only rely upon the sanctions list issued by the competent authority.

5. Inadequate Case Management


Inadequate management of Sanctions alert data, including:

6)Alert logs

Evidence of screening

Reasons for Closing alerts and the approval process

Inadequate due diligence records,

Key attributes of the sanctioned person include Aliases, nationality, etc.

Solution: Use AML software that automates case management and covers all the required information.

7)Incorrect Configuration of Screening Software


The sanction screening software is not aligned with the risk-based approach taken by the firm, and not all relevant sanctions lists are used while screening a customer.

Solution- Take a professional software implementation service to ensure that the screening software is configured correctly to consider all types of sanctions and watchlists.

8)Missing out on Partial Name Matches

Deficiency- Neglecting partial name matches found during sanctions screening.

Solution- Check for various attributes such as date of birth and aliases to confirm or eliminate partial name matches and submit a Suspicious Transaction Report if there’s still no conclusion.

9) Lack of Adequate Employee Training


Employees are not provided with the adequate sanctioning screening procedure and actions needed based on screening.

Solution: In-depth sanctions screening training must be conducted under the guidance of expert AML professionals.

10) False Positives Leading to Inefficiency


Non-sanctioned individuals and entities are flagged, leading to unnecessary efforts in alert remediation.

Solution: Compare the right factors to quickly detect false positives.


*ACAMS community Due Diligence 

A) Brenda Lopez Calvario

B) Amy Wotapka 

*Copyright © 2022 AML Singapore . All rights reserved.

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