Is your sanction screening software up to task? Getting “no hits” may feel like a good result—but it may not be beneficial for your anti-money laundering (AML) program. In 2018, the Office of Foreign Asset Control (OFAC) assessed over $71 million in fines to companies in the U.S. and abroad1. In several cases, the fined companies were using a screening solution. The problem? Their screening solutions were using limited search parameters and missed important details.
And consider this: In the past two years, insurance companies operating within the U.S. have received OFAC violations leading to substantial penalties2.
What do OFAC requirements mean for insurance companies?
Insurance companies must check that the people and organizations they do business with are not listed on government screening lists. In addition to OFAC, regulatory requirements are set by the USA PATRIOT Act and other government regulations.
Complying with these requirements isn’t just a matter of following the rules. Insurers—and everyone they employ—can help manage the risks associated with criminal activity that these requirements aim to address.
What are the limitations of screening solutions?
Many organizations use software to help them cross-reference their databases against sanction screening lists. Even though the software can report possible matches, a human still often needs to determine which are true matches and which are false positives. For example, an insurance company with millions of policies could generate thousands of possible matches. While the percentage of matches is still low, the actual time required to address the potential matches is prohibitive for most organizations.
What should I look for in a screening solution?
An effective sanction screening solution should provide useful, transparent processes for you to satisfy your compliance requirements while minimizing false positives and rework. Here are some questions to ask:
- If you’ve already identified possible matches as false positives, how can you reduce their number in future scans?
- Does your screening solution look for misspellings, name configurations, transpositions of letters, and numbers?
- Is your screening solution equipped to manage the expanding need for due diligence in Russia? Expanding sanctions in Russia require additional due diligence, especially regarding ownership and denied parties involved in transactions?
Insurers need to navigate an increasingly stringent regulatory environment, and keeping abreast of developments means diverting focus from other activities. Investing in a robust, exhaustive, and streamlined compliance program can help you to foster a culture of compliance and enable you to do business with confidence. Importantly, it can help your organization proactively protect itself from reputational harm, fines, and legal fees associate with a violation.
How can I reduce the number of false positives in my OFAC screening?
An ideal matching algorithm will catch all the actual matches while reducing the number of false positives. But that can be a fine line: you certainly don’t want to reduce matches to the point where you miss an actual match. Importantly, no two matching algorithms are created equal, and more sophisticated matching algorithms can yield fewer false positives.
LexisNexis® Bridger Insight® XG can help you reduce the number of false positives in your sanction screening solution. Our platform uses fuzzy logic to detect and evaluate approximate matches, rather than require letter-for-letter matching. We also provide a confidence score, so you have a measure of how close the information between customer and watch lists are. In short, we can help you automate your compliance processes and find more likely matches.
Find out how Bridger Insight® XG can help you support and streamline your compliance workflow, case management, and reporting processes here.
1&2 U.S. Department of the Treasury. (2020, July 17). Retrieved July 27, 2020 from https://www.treasury.gov/resource-center/sanctions/CivPen/Pages/civpen-index2.aspx