Major Challenges of KYC Monitoring

False positives are a huge burden on controlled companies since time and resources are spent pursuing a false positive that is often unjustified. However, if companies do not conduct the right screening of PEPs and penalties, they can face significant fines from the regulator.

FREMONT, CA: Many companies have taken the trouble to digitally turn their boarding but are wasting eye-watering amounts of money and man-hours on wasteful processes when it comes to ongoing monitoring. And yet KYC control is crucial to ensuring compliance with the Money Laundering Directives so where does it all go wrong, and what should companies do to make changes?

Read on to see if your company is resonating with our pain points.

Money and Time were Spent on False Positives

A false positive occurs when a legitimate consumer is flagged for enhanced due diligence because their name matches the name on the Political Exposed Persons (PEPs) or the Sanctions List.

False positives are a huge burden on controlled companies since time and resources are spent pursuing a false positive that is often unjustified. However, if companies do not conduct the right screening of PEPs and penalties, they can face significant fines from the regulator.

Usually, 75 per cent-85 per cent of warnings are false positive for a typical financial institution tracking KYC or KYC Companies, with up to 25 per cent checked by level-two senior analysts (source). Working through each warning is time-consuming and complicated at an average expense of £20 each time, generating a hefty bill as Financial Services has millions of customers on the screen.

Although false positives cannot be entirely eliminated, an automated process would minimise the difficulty and reduce running costs.

Unidentified Threats Due to Bad Data

A false negative, on the other hand, occurs when a customer affiliated with a sanctioned agency is not flagged for enhanced due diligence. Failure to recognise a sanctioned agency can be serious; it can also lead to fines, regulatory compliance and harm to reputation.

Your danger radar can be exposed without quality data sources to identify PEPs and sanctioned individuals.

Accurate data entry, human error as well as poor data quality are at the centre of the enforcement screening problems that professionals face on a daily basis.

With an annual increase of 35 per cent in the PEPs register alone (source), 33,000 sanctioned individuals and more than 11,500 sanctioned companies worldwide, it is vital that new and current clients remain compliant.

Is your company using quality data sources that are revised and consolidated automatically? When you're not going to be checking your procedures.