The essential regulatory obligation of AML sanction screening involves the meticulous task of comparing names, addresses, and other details in financial transactions against various watchlists, including government sanction lists. It is a tedious undertaking that regulators insist on performing multiple times every day year-round. Whether it's processing all kinds of payments, granting loans, or updating sanction lists, AML sanction screening is mandatory.
Existing Technologies & Operational Challenges
The primary reason for excessive operational costs and the tedious structure of sanction screening lies in the outdated nature of existing technologies. These technologies, even the new ones, are not designed to meet the current regulatory and operational demands, particularly the need to screen against huge and diverse multilingual databases of individuals and entities. Consequently, matching names accurately becomes a major challenge.
Alerts, False Positives, and False Negatives
Currently, the market primarily focuses on three parameters: Alerts, False Positives, and False Negatives.
Alerts indicate a probable hit. Existing technologies yield an average alert rate of 30-50%, contributing to an overwhelming number of alerts.
False Positives represent the multiple results obtained per alert. For instance, when using systems considered "advanced" in today's AML technology landscape, there are approximately 9 false positives generated for every single alert. This results in a prolonged alert closure time, averaging over 8 minutes. And time is money!
False Negatives denote the missed hits, signifying names that should have triggered enhanced due diligence but did not. While this implies that a criminal may have evaded detection, it also indicates that a name requiring scrutiny did not receive the necessary attention.
When talking about the AML Screening system, it is also vital to consider potential costs such as fines due to missed hits, reputational damage, customer retention issues arising from extended processing times, and others. However, more importantly, is the issue of an overwhelming number of false alerts that eventually lead to extensive workload, extended working hours, overstaffed compliance departments, inevitable mistakes (due to human factor), and prolonged processing times. All these skyrocket operational expenses.
Introducing the Total Cost of Ownership (TCO) as a crucial aspect of an efficient AML Screening solution
Considering all of the above, it is essential to introduce a fourth parameter: the Total Cost of Ownership (TCO). The TCO encompasses the variable costs associated with Alerts, False Positives, and False Negatives, which need to be calculated collectively. This includes expenses related to IT licenses and operational activities and resources required to resolve alerted cases.
Considering TCO for Choosing Sanction Screening Technology
When a bank is selecting a sanction screening technology, the TCO should be a key consideration. It accurately reflects the true burden imposed by this regulatory requirement. Even if a company pays a higher price for the IT license, a mitigated operational burden leads to a far more favorable TCO.
Enhancing AML Compliance and reducing Operational Costs by >90%
Fincom has developed and deployed a cutting-edge solution for Real-Time AML Sanctions Screening that offers the most efficient and effective screening capabilities to banks and other regulated institutions.
Along with ensuring smooth real-time screening with no misses and the lowest on the market alert rate (<3% as opposed to over 30% current market average), Fincom’s solution helps reduce operational expenses by over 90%!
The solution offers:
- 90% Reduction of Operational Costs: Fincom's AML Sanctions Screening has proven to reduce alert rates to below 3%. With its highly effective alert suppression mechanism, the system reduces it even further (below 1% over time). This leads to >90% reduction of operational costs!
- Accurate Name Matching: At the core of Fincom's Real-Time AML Sanctions Screening lies its innovative Phonetic-Linguistic engine. It allows tracking phonemes across 44 languages, as well as transliterated names, considering spelling mistakes and variations. This ensures Accurate Name Matching, free of “AI bias” and applicable to both simple and structured names.
- Multi-lingual capabilities: By recognizing both the names in their language of origin and their transliterations, Fincom's technology overcomes language barriers and matches names directly without the need for “romanization.”
- Real-Time Screening: Accurate name screening in <200 milliseconds.
- Perpetual KYC: Fincom saves human and technological resources and increases compliance by providing a fully automated Perpetual KYC solution that does not disrupt the usual workflow.
- Straightforward and transparent Audit Trail for internal & external audit.
- Intuitive Case Management System with an integrated permission hierarchy to facilitate operations across multiple teams with both 2-eye and 4-eye reviews.
Finastra and Fincom have established a close collaboration with strong synergy between the companies to deliver the leading Real-Time Payment solution with an integrated AML Suite.
Finastra has partnered with Fincom to accommodate the growing market need for a reliable AML solution. All Finastra’s payment platforms are now enhanced with this efficient, cost-effective, and extremely accurate AML screening system. This partnership creates a powerful fintech ecosystem that provides banks, financial and non-financial institutions, and other regulated bodies with an entirely secure AML-proof payment system that ensures frictionless payments processing throughout all payment rails (SWIFT, Wire, RTP, ACH, etc.) along with adherence to AML regulations through effective sanction screening for clients onboarding (KYC/KYB), ongoing monitoring (perpetual KYC/KYB), transactions screening, and more.
In the realm of AML and compliance technology, Fincom's Real-Time AML Sanctions Screening stands out as a powerful solution that addresses the challenges faced by financial institutions. With its advanced Phonetic-Linguistic engine, multi-lingual capabilities, real-time screening, and minimized alert rates, Fincom empowers banks to strengthen their AML compliance efforts while minimizing operational costs. By leveraging Fincom's technology, financial institutions can enhance and ensure regulatory compliance in an increasingly complex financial landscape.
Explore our new solution, Finastra Compliance as a Service – a field-proven, cloud-enabled payments processing and compliance solution for the US and European financial institutions.
For more information on Fincom’s AML capabilities, check this factsheet here - Fincom AML Screening.
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