5 Elements of a Proper and Thorough Customer Screening Process

Photo by Mika Baumeister — Unsplash

In the banking world, customer screening pertains to the process of accounting for a bank’s data on its prospective and current banking customers. This is done so that the bank can mitigate its risk of doing business with bad actors.

For certain, any financial institution would want to protect itself from any association with money laundering, terrorist financing, and other forms of financial crime. But the reality is that too few banking leaders have done the work to re-examine their customer screening processes for full effectiveness against these challenges. To make matters worse, financial criminals are getting even better at slipping through the cracks and disguising their illicit activities under the cover of legitimate business.

Knowing what you’re up against, what should you change about your customer screening process so that it can better serve your institution and your legitimate customers? What are the key components of your current process—like data analytics, case management, and sanctions screening—that you should upgrade as soon as you have the time and resources to do so?

To answer that question, here’s an overview of five elements that need to be part of your customer screening process:

Excellent Data Quality and Data Management

The foundation of any solid customer screening process is data. Without comprehensive and well-managed data, you won’t be able to get a full picture of just how vulnerable your bank is to the wiles of financial criminals.

Thus, you must commit to reworking your customer screening process so that it can rely on exceptional data quality and sound data management practices. The said process must also provide you with high-level data customization options for every field or parameter that you need to keep your eyes on.

As your bank grows larger and more reliant on digital technologies, a more data-driven customer screening process will be crucial to you and your lawful customers. Revisit your process and ensure that data quality and data management are truly part of its backbone. 

Advanced Data Analytics and Matching Capabilities

On the topic of data-drivenness, an effective customer screening process also makes use of advanced data analytics and matching functionalities. Your process should be capable of handling huge volumes of customer data, analyzing the particularities, and sorting all information of interest according to your bank’s screening criteria. A solid screening system will make it easy for you and your staff to distinguish between the false positives and the cases that merit alarm. 

It’s a good idea for your bank to invest in advanced data matching capabilities so that your system can recognize granular details in your customer data with higher precision. These include typos in names, prefixes and suffixes, concatenations that involve either alphabetical or numerical text, and characters that are unique to a specific language. Let these particularities factor into cases where they may be relevant, such as determining the geographical location of a ring of potentially fraudulent customers, for example.

Quick and Up-to-the-Minute Sanctions Screening Functionalities

A third quality that must be present in your customer screening process is up-to-dateness in its sanctions screening.

You should be able to deploy real-time sanctions screening protocols that can quickly match incoming customer data with data from global regulatory watchlists, lists of politically exposed persons (PEPs), and the like. It shouldn’t be hard to cross-check the data that comes into your system with data from mainstream news sources, press releases, and government data repositories. Your customer screening process should also be able to link data across multiple jurisdictions and localities.

Perpetrators who enter your banking system may be under the illusion that you won’t do an exhaustive check on them, or that they can buy time before they’re discovered. Don’t allow them to have those advantages; instead, utilize airtight sanctions screening methods for your overall customer screening process from the get-go.

Integrated and Responsive Case Management

Another cornerstone of an effective customer screening process is fully integrated and responsive case management.

The last thing you need is a system that’s overwhelmed by the tedium of sorting false positives from false negatives. Instead, you should possess a system that relies on an intelligent categorization of priority cases, cases that need extended monitoring, and cases that do not present imminent danger according to your screening criteria.

Bolstering your case management will make your case investigators even better at their jobs. If they already know where to focus their efforts, they can save time when resolving cases and facilitate swift action for the cases of greatest concern.

Conduciveness to Regulatory Compliance

When it comes to customer screening and anti-money laundering (AML) practices, there are several regulations that banks are enjoined to follow. Some examples are the Foreign Corrupt Practices Act and the Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act in the United States.

Given these, a bank should aspire for a customer screening process that can provide all the important answers to its regulators. This will help the organization avoid steep penalties and remain in good standing within the financial industry.

It’s high time to revisit your customer screening process so that it can hold up under regulatory scrutiny. Confirm for your regulators that you uphold the utmost transparency in your screening system and that your bank takes the issue of financial crime very seriously. Strengthen your compliance efforts by making your process easily auditable and investing in a platform that can quickly generate compliance reports that follow specific regulatory templates.

Takeaway: Customer Screening That Serves Customer Experience

From the items above, you may have gotten the impression that your customer screening process must be extremely stringent for it to be effective. But while stringency should indeed be a defining characteristic of your process, remember that you still need to strike a balance between successfully marking anomalous cases and making your legitimate customers feel comfortable and secure. 

Given this, implement a customer screening process that not only leaves no legroom for potential fraudsters to move around in, but also avoids alienating the customers that you want to keep in the long run. The final result should be a simplified, well-designed, and frictionless process that keeps criminals out and good customers in—with the latter being confident in your bank’s ability to safeguard their interests.

Cover Photo by Mika Baumeister / Unsplash.

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