With daily changes in the status of the ongoing war taking place in Ukraine, it’s essential to be aware of the implications the current state of affairs can have on your organization’s compliance policy. Sanctions are still rapidly being implemented and updated, and the volatility of the situation increases the possibility of fraudulent activities going unnoticed. There is substantial risk that someone who previously passed various criminal, AML or KYC screenings would now fail. How can compliance be maintained and the risk of fraud mitigated in a sanctions environment that changes daily?
Traditionally, manual re-screenings are the answer to a changing compliance situation. Potential risks would be identified based on location or other factors and they would need to be regularly rescreened for changes in status. There are significant challenges with this approach though. If the parameters for who to re-screen are too narrow, there are risky entities and people left without the needed re-screenings. If the parameters are set too broadly, the volume of manual checks means that the re-screenings may not be completed quickly enough, leading to the same issue as not rescreening at all – the risk of doing business with sanctioned individuals or other bad actors and violating local and national laws.
A new vision of dynamic compliance
Compliance is now more critical than it’s ever been previously, not only because of the inherent risks but also because of the increased repercussions one can face if they are not meeting standards. The repercussions are not just legal and financial, as reputational damage within the industry and scrutiny from the general public are very significant issues an organization must face when in violation.
Legacy compliance solutions are effectively databases that contain mountains of often outdated data that must be manually searched. The pure volume of information and the risk of false positives leads to substantial time and effort to rescreen a volume of potential risks.
Companies don’t have to accept financial, legal and reputational damage due to a compliance misstep that could be avoided. Modern compliance tools offer solutions to the problems inherent with legacy databases. Intelligent filtering, data refreshed as often as the sources allow, and automated continuous monitoring of previously screened people and entities change the landscape for compliance and risk mitigation. Leveraging monitoring for compliance screening has become more common over the last few years but in the current dynamic sanctions situation created by the Russian invasion of Ukraine it is now a best practice requirement to ensure the changes in sanctions and screening status that occur daily are accounted for.
Ditch Legacy Processes, Adapt and Overcome
Meeting all compliance requirements and minimizing risks is more than challenging enough during normal situations. Automation, machine learning and intelligent name matching technologies that have been implemented to save time and money in compliance make it easier to embrace continuous monitoring technology as a standard step in KYC protocols. Since the ability to monitor fits neatly within that existing technology base, the additional cost is much lower than manual rescreening – while providing better protection as automated checks can instantly flag issues as soon as data sources update.
Monitoring of all previously screened individuals against sanctions changes is a massive task. Risk mitigation teams and executives have to accept that there will likely be individuals or companies that fall through the cracks and may not be identified in a timely fashion, or at all, if it is a manual process. The increased volume of sanctioned individuals and companies over the last few months have only increased the risk, and will continue to increase risk as sanctions expand. A compliant organization must stay up to date with the latest information and data. Without a veritable army of compliance screeners, automation is the only efficient way to curate the volume of data with the current frequency of changes and updates we’re seeing in the sanctions world.
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Amy Barbieri co-founded Vital4 in 2016 and brings a wealth of expertise in international background screening, global compliance, fraud and risk mitigation. Amy has over 25 years’ experience in sales and marketing for SaaS, technology, data and compliance.