Feb 26, 2024

5 things to consider when implementing effective sanction screening

December 14, 2023

Sanction screening is a crucial part of financial crime prevention, but inconsistent and low-quality data makes the process difficult. How can you ensure that your screening algorithm actually finds the correct sanctioned entities?

5 things to consider when implementing effective sanction screening

Sanction screening is a critical process in the financial sector aimed at identifying and assessing individuals, entities, or countries subject to economic and trade sanctions. These sanctions can be imposed by governments, international organizations, or regulatory bodies due to various reasons, including concerns related to terrorism, money laundering, human rights violations, or nuclear proliferation. The process itself consists of comparing names of persons, companies, vessels or other entities to the names on public sanctions lists to detect matches.

When you're setting up a solid system for sanction screening, here are five things to keep in mind:

  1. Look beyond onboarding: Sanction screening is not just relevant for new customer applications. It also intertwines with various situations like your customers' transactions or complicated ownership structures in your business clients. Making it a part of your everyday operations is the key to catching issues effectively.
  1. How high is your true positive rate? In other words; How good are you at detecting every sanctioned party that crosses your path? Accidentally approving a loan to a sanctioned entity is not just a compliance risk; it could fuel serious problems like terrorism or organized crime.
  1. How low is your false positive rate? In other words; How prone are you to accidentally mistaking an innocent party as sanctioned? While attempting to mitigate the risks mentioned in pt 2, one might tend to always assume that a party is sanctioned when in doubt. However, this could lead to innocent people being denied loans or bank connections. This in turn leads to economic losses and disruption of bank operations, as they constantly must turn away new customers or block “suspicious” transactions.
  1. How high is your efficiency? In other words; how many parties must be manually screened to determine whether they are sanctioned? Aiming for higher detection accuracy can easily lead to the trap of throwing manual resources on the problem. This clearly drives costs very quickly and is never a good long-term solution.
  1. How effective is your entity resolution algorithm? When checking if an entity is mentioned in any sanction lists or adverse media, you cannot rely on a name always being spelled the same way. “John Albert Smith” might sometimes show up as “John A. Smith”, or even misspelled as “Jon Albert Smith”. The entity resolution algorithm must be able to detect similar entries of names in texts, but also to use other fragments of information to determine if it is really encountering a true positive hit.

Convier has one of the most advanced entity resolution algorithms on the market, tackling both unstructured and low-quality data. Check out the video below to learn more about how entity resolution is done in our platform:

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Kaja Kvello
Product Manager

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