The Sanctions Screening Ruse: How Financial Institutions are Failing to Fight Financial Crime
As we delve into the world of financial institutions, it becomes clear that the battle to prevent money laundering, terrorist financing, and other illicit activities is far from being won. The problem? Sanctions screening, once touted as a critical tool in the fight against financial crime, has become little more than a mere formality.
According to insiders, the current system of sanctions screening is rife with flaws. Eve Whittaker, Market Planning Director at LexisNexis Risk Solutions, paints a bleak picture, stating that traditional methods of screening are no match for the sheer volume of transactions today. "Manual screening is a recipe for disaster," she warns. "The risk of human error is too great, and the consequences of getting it wrong are severe."
In fact, Whittaker suggests that the very thing that is meant to stop financial crime – sanctions screening – is actually being circumvented by clever criminals. "The black market for sanctions evasion is thriving, and it’s all down to the fact that many financial institutions are using antiquated methods to screen for sanctions," she claims. "It’s a bit like trying to stop a cat from scratching a mirror – it’s just a futile exercise."
But don’t just take Whittaker’s word for it. A recent study by a leading financial institution revealed that a staggering 9 out of 10 companies were failing to adequately screen for sanctions. The numbers are staggering, and they paint a picture of an industry that is woefully unprepared to tackle the growing threat of financial crime.
So, what’s the solution? Whittaker is adamant that Artificial Intelligence (AI) holds the key. "AI is the only way we’re going to get sanctions screening right," she claims. "It’s faster, more accurate, and more efficient than anything humanly possible."
But what about the risks of implementing AI in sanctions screening? Whittaker is clear: "The risks of not implementing AI far outweigh the risks of implementing it. We need to catch up with the criminals and start using technology to stay one step ahead."
So, the next time you hear someone talking about sanctions screening, remember: it’s not just about doing the right thing – it’s about staying ahead of the game. The alternative is a financial system plagued by corruption and crime.
The AI Revolution
In a world where humans are no longer needed for sanctions screening, AI becomes the ultimate game-changer. Whittaker says that AI can eliminate the need for manual screening, providing a more efficient and cost-effective solution. "We’re not just talking about speed and accuracy here, we’re talking about staying ahead of the criminals who are constantly trying to exploit the system."
But that’s not all. AI can also help identify the most high-risk transactions and flag them for further review. "This is what we call ‘fuzziness’ – the leeway required to ensure nothing is missed, but it can lead to false positives," Whittaker explains. "AI can automatically eliminate these false positives, freeing up human resources for more important tasks."
Generative AI (GenAI) is another game-changer. Whittaker describes it as "a computer program that can create an unlimited number of unique output combinations based on a fixed set of input parameters. It’s like a chess grandmaster, always planning several moves ahead."
AI can also be used in the pre-processing stage, organizing and structuring the data, and deriving better quality matches. In the post-processing stage, AI can assist in deciding which identified potential matches need to be prioritized.
"This is the future of sanctions screening," Whittaker concludes. "We no longer have a choice, we must adapt to stay ahead of the criminals and ensure the integrity of our financial system."
