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Lack of Consistent Sanctions and Risk Customer Screening Standards Exposes Firms to Heightened Compliance Risk

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Many large financial institutions are failing to implement consistent policies and procedures for sanctions, Politically Exposed Persons (PEP) and customer risk screening due to inconsistent, legacy-based systems, according to compliance screening and data management specialists, Datanomic. Fragmented and inconsistent legacy platforms with different criteria and capabilities deployed across multiple departments and/or countries are resulting in substantial audit problems, impairing consistent enforcement of corporate policies. This fragmented approach is leading to potential failures in identifying sanctioned individuals and increased risk of fines from regulators.

In its recent report, “Financial services firms’ approach to UK financial sanctions”, produced by the Financial Services Authority’s (FSA’s) Financial Crime and Intelligence Division, the FSA highlights “many instances where country specific and/or business unit policies and procedures fail to meet the minimum standards set out in the group wide policy.” The report also indentified weaknesses in major financial groups’ systems and controls, which made it difficult for them to comply with their policies in relation to UK financial sanctions. These weaknesses often arose from the difficulties of operating multiple legacy IT systems across the group.

“Firms that operate in a number of countries, need a consistent group-wide policy to assist local business units in ensuring that their local procedures meet minimum group requirements,” said Simon Pearson, director of compliance screening at Datanomic. “We’ve seen numerous instances of large global financial giants risking millions in fines and penalties through their inability to flag individuals and entities adequately across countries, departments and systems. Both international and domestic screening regulations and compliance requirements have strengthened almost every year, yet only a handful of the large financial conglomerates have realised the need to implement a consistent system across all regions and departments to ensure 100% compliance and adherence to corporate policies and procedures.”

Many large firms are now in the process of devising or implementing a single firm-wide IT system to tackle these issues. Earlier this month, Barclays announced that it is standardising on Datanomc’s dn:Director Sanctions & PEP Screening software as its preferred solution for its next generation customer screening platform to combat the problem of inconsistent and disparate systems across its global operations. The Datanomic software will replace multiple customer screening solutions across many geographies and will provide Barclays with unparalleled accuracy for systematic screening in both Western and non-Western languages/character sets.

“Large globally dispersed financial institutions, such as Barclays, need a multi-disciplinary solution capable of creating and enforcing globally-consistent corporate policies and procedures,” added Pearson “All staff must be trained and held to the same standard, and this is only possible through the implementation of best-of-breed technology, incorporating screening software such as dn:Director that has the ability to work with both western and non-western scripts. Traditional text-based matching is insufficient for global screening, and contextual processing of cultural variations of both western and non-western script names is essential.”

To address the growing need for comprehensive global screening, Datanomic has integrated its dn:Director Sanctions & PEP Screening software with IBM’s Global Name Recognition (GNR) Technology to create the industry’s most powerful software solution for compliance screening. The fully integrated solution integrates GNR with dn:Director as a series of dn:Director processes, combining rich functionality that delivers accurate, systematic screening in both Western and non-Western languages/character sets.

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