At SQA Consulting, we provide assurance and advisory services to many Financial Institutions (FIs) to help them manage their financial crime risk. Focusing on screening and transaction monitoring, our consultants have years of hands-on experience in banks and other FIs.
Over the years, we have worked with many of the world’s leading FIs to test and assure their screening systems. For a long time, there was a heavy focus from our clients on sanctions screening, but in recent times, screening of Politically Exposed Persons (PEPs), Relatives and Close Associates (RCAs) and Adverse Media is getting more and more attention.
We recently ran a benchmark survey across our clients and other financial institutions to identify and understand the different approaches that have been adopted for screening of Politically Exposed Persons (PEPs), Relatives and Close Associates (RCAs) and Adverse Media. The participants ranged from major international banks to large insurance companies and e-money firms. The topics for the survey included:
- Screening systems and list providers
- Screening approach (Full vs Full or Changes only)
- Types of PEPs/RCAs/Adverse Media that are in scope
- Whether PEP/RCA/Adverse media customers are categorised into different risk categories
- How Enhanced Due Diligence is applied to confirmed PEP/RCA/Adverse media customers
The report with the detailed findings has only been issued to the survey participants. However, we are able to share a couple of the highlights.
Overall, it was apparent from the respondents that PEP and RCA approaches are generally well established whereas the approach to adverse media screening is less mature and still evolving for some.
The PEP and RCA approaches were relatively consistent for most questions, with slight variances noted in relation to the management of religious leaders and step relations as well as the classification of PEPs.
As with many areas within compliance, there is no simple right answer. However, where regulators are concerned, there can definitely be a wrong approach. The key points we made within the report were that firms need to carefully consider the systems, configurations, policies, and procedures for PEP, RCA, and Adverse Media screening, ensuring that the is alignment to the Firm’s risk appetite. The regulator will expect decisions to be documented and supported by appropriate rationale.
To give some examples, systems with a default (i.e. non-tailored) configuration will rarely be fit for purpose and the seemingly safe option of including all lists and options will likely lead to an unmanageable level of false positives.
As well as assessing the approach, the SQA Consulting Screening Assessment Centre can provide a detailed assessment of the strengths and weaknesses of your system and its configuration.
If you would like to understand how your screening aligns to this benchmark, please get in touch.