Banks and financial organizations are becoming increasingly vulnerable to financial crimes such as fraud, money laundering (ML), and terrorist financing (TF). In response, the Financial Action Task Force (FATF), an intergovernmental organization, has established a legal framework for combatting the exploitation of companies and financial systems for criminal activities. As a result, every country has stringent anti-money laundering (AML) compliance mechanisms in place, with penalties for noncompliance.
What Exactly is Sanctions Screening?
Sanctions are actions done by a government against another nation, a system, or a coalition in response to a violation of international law. Sanction screening, on the other side, is software that assists financial institutions in identifying and discovering financial crimes. People, countries, and businesses are all on the Sanction Screening list. Sanction Screening software uses this list to scan and examine public and private sanctions lists throughout the world.
Sanctions Screening is the most critical procedure that financial companies may use when onboarding a new client and throughout each customer's activities. Furthermore, financial institutions should test their consumers on a regular basis to detect any potential noncompliance.
Why is Screening Against PEPs and Sanctions Lists Beneficial?
Financial or economic links with persons or companies on the PEPs and Sanctions Lists are extremely dangerous. To begin, each nation has AML/CTF compliance requirements, which involve continuing CDD (including screening) as part of ongoing financial checks and monitoring. Noncompliance may result in severe penalties totaling hundreds, if not millions, of dollars. Second, there is a chance of getting in trouble with the law by interacting with disreputable individuals and being drawn into their financial crimes. Third, firms who do not execute screening compliance risk having their business reputation harmed and their money ruined.
Businesses' basic AML/CTF compliance does not disclose concerns connected with "high-risk persons and entities." As a result, separate checks against PEPs and Sanctions Lists are required to safeguard you and your company from the threat of financial crime.
Who Exactly are Politically Exposed Persons (PEPs) and Relatives and Close Associates (RCAs)?
A Politically Exposed Person (PEP) is someone who obtains a prominent public position in a governmental body or an international body. Politically Exposed Individuals have the right to comment on the government's spending and budget. Examples of Politically Exposed Persons include government ministers, high-ranking judges, and military officials. PEPs might be a target for corruption due to the prominence of their status. Even while the scenario is dangerous in terms of criminality, this does not imply that all Politically Exposed Persons are participating in illegal activities connected to Anti-Money Laundering (AML).
Relatives and Close Associates(RCAs), on the other hand, are those who have a familial, related, or friendship relationship with a Politically Exposed Person (PEPs). This relationship can be formed by proximity, engagement, intimate social activities, and close friend relationships.
List of PEPs and Sanctions on a Global Scale
Politically Exposed Persons (PEPs) are high-risk individuals because they are more likely to commit financial crimes. PEP Lists are classified into two types: databases of named or documented PEPs and databases of Functions, Positions, and Roles. The first contains the consumers' personal information. However, this list may need additional in-depth investigation since if verification cannot be supplied, it is not regarded as proof that they are not PEPs. The emphasis in the second type of PEP List is on the positions, functions, and responsibilities since the individual in the high–ranking position is more likely to be involved in money laundering.
Sanctions Lists, on the other hand, are issued by countries and international organizations to target financial criminals who are involved in unlawful circumstances such as money laundering. Sanctions lists are made out of individuals, organizations, and countries. As a result, for banks, FinTechs, and other financial institutions, Sanction Screening is largely a mandatory component of the Customer Due Diligence process.
Sanction Scanner's AML Solution Facilitating Sanctions Screening
Sanction Scanner's AML software is a cutting-edge program that provides sanctions screenings for PEP screening. It offers real-time access to international databases. When the customer onboarding process, companies can create an AML control program suitable for their risk levels by scanning their customers in more than 3000 global sanctions, PEP, and Adverse Media data updated every 15 minutes.
As a result, Sanction Scanner's AML Screening Solutions assists banks and financial organizations that wish to avoid the high costs of continuing compliance and onboarding compliance. If you would like to learn about our AML solution, you can contact us and request a demo.