A concrete use case for Sanction Challenger.
The Monetary Authority of Singapore’s Guidance on Strengthening AML/CFT Name Screening Practices.
Overview
2022 has proven to be a tricky year for Financial Institution’s (“FI”) Sanctions Programs. The Monetary Authority of Singapore (“MAS”) has issued guidance on strengthening AML/CFT name screening practices for FI’s in response to the challenges presented. MAS performed examinations in 2021 on mid-sized & small FI’s name screening processes and found the following key high-level observations[1]:
- Senior Management of some FIs did not issue adequate oversight of the program. This led to deficiencies in P&P and insufficient controls over alert resolution. These resulted in lapses in the execution of name screening controls and, in some cases, potential regulatory breaches.
- FIs tended to place undue reliance on system vendors to set the parameters in their name screening systems. These FI’s subsequently did not adequately understand how the settings impacted the accuracy and effectiveness of the screening results.
- FIs’ screening systems and tools may not be correctly tuned/calibrated to mitigate the risk of their business activities successfully.
- FIs are not adequately and continuously assessing and testing that the screening parameters are effective for generating name matches.
- FIs should work with their screening tool/system vendors to gain a mutual understanding of the recently issued AML/CFT name screening guidance by MAS to ensure the screening tools are being effectively utilized.
Implications
FIs in Singapore and around the globe should understand the findings provided by MAS and update their AML/CFT program to the standards set by the MAS. The following are some of the methods FIs can take to enhance their AML/CFT name screening processes[1]:
- Senior Management Oversight: Senior Management needs to prioritize AML and CFT name screening initiatives to create a culture of compliance that always needs to come from the top. Senior Management of FIs should bolster P&Ps to adequately cover the name screening process. Clear records of Senior Management meetings and discussions related to name screening should be saved and used for examinations or audits in the future. Senior Management should review existing controls over the alert resolution process to further ensure accuracy.
- Screening Parameters and Databases: FIs should efficiently assess and test the screening parameters to confirm that they are effectively utilized for the name screening process. There should be a consistent review process to test that the parameters remain adequate over time, and if there are deficiencies, make the necessary adjustments. The vendor’s screening name databases and internal screening lists are essential to test. There is a trend of over-reliance on vendors that FIs need to break to have the most accurate screening parameters.
- Alert Resolution: FIs needs to maintain sufficient alert/match resolutions documentation. FIs should also include alert resolution assessments in their control framework. The criteria used to assess alerts should be up to the industry standard. For an example of poor criteria used for evaluating signals, MAS found that some FIs would consider an alert as a false positive due to the adverse news source being a local or regional source.
- Inadequate Tools for Batch Screening: FIs should ensure that they have adequate tools for batch name screening. Critical considerations for tools are that the tool is automated and not manual. The tool should handle the names of all relevant/connected parties of clients. And the tool should allows for name screenings to be done promptly.
- It is recommended that all FIs under the scope of the MAS take this guidance into account for their AML/CFT program and make any necessary improvements to their program.
How we can help
Sia Partners can assist your organization in complying with the latest AML/CFT name screening guidance from MAS. Sia Partners can provide the following solutions to help your organization adhere to the newest MAS guidance:
- With our brand dedicated to AI, Heka.ai, we have developed AI-powered sanctions screening optimization tools to reduce the volume of nonproductive alerts and accompanying false positives. For example, our Sanction Challenger can provide insights on how to calibrate the system correctly and suggest the types of enhancements be made to the filtering process to optimize your false positives while maintaining accuracy of your tools.
- Our Risk, Regulatory, and Compliance team can assist FIs in training employees on industry best practices for AML/CFT name screening.
- Our experts can help tune or calibrate your existing name screening tools, so the correct logic is in place to get the most accurate results and reduce false positives.
- Our experts can enhance your organization’s P&Ps to better define and document your AML/CFT name screening processes.
