A robust watchlist screening, which enables enterprises to build a secure and strengthened framework against illicit financial activities, also requires optimization and addressing challenges for accuracy and fast response. Highlighted in the UNODC Report on Darknet Threats in SouthEast Asia, approximately 200,000 Tor darknet servers were reported in the mid of 2022 that facilitates criminals to trade illicit products and services majorly through veiled communication and cryptocurrencies.
The escalated financial crimes have shifted the focus of entrepreneurs and crime fighters towards creating a watchlist management which is both resilient and reliable against the financial crimes, relying on global watchlist screening. Focussing on the strict and leak proof financial constraints and policies, ongoing watchlist screening offers the lawmakers and business owners a ground for imperative monitoring. With increased protective layers against the financial crimes, the fraudulent personals always find a way to break through the wall. For a fact, around 2-5% of global GDP nearly 800 billion to 2 trillion US Dollars are laundered every year, stated by UNODC.
Let’s take a brief tour of the downsides and potential challenges of current watchlist screening systems and the optimizational measures watchlist screening service providers have been implementing in the frameworks enabling you to stand strong against the financial crimes.
Oversighting Due to Transliteration Errors
A rigorous monitoring through watchlist is essential to protect national and international security, emphasized by the Department of Homeland Security (DHS). For instance, crossing any border makes it essential to run an identity check where the spelling variations and cultural name conventions can cause travelers inconvenience considering one entry results in multiple outcomes, generating the wrong alarm. It requires a vigilant and responsive screening system, addressing transliteration errors. The latest watchlist screening (WL) systems embedded with anti-money laundering (AML) technology laced with a wide linguistic database have rescued the boat from sinking, protecting it from suspicious entities and non-compliance fines. Such systems successfully convert entries and resolve multiple script challenges.
Data Protection and Confidentiality
Another challenge faced by AI-driven screening protocols is the protection of sensitive data against cyber attacks. An optimized balance between privacy rights and individual expectations is required from automated watchlist screening service providers. On March 31, 2021, in his speech, Secretary Mayorkas at DHS addressed the government and industrial authorities to opt for more robust encryption methods to protect the data against cybercrimes. He also stressed using stronger and more protected screening mechanisms for organizations since quantum computers have become even more powerful in breaking through barriers. The need for more secure and encrypted watchlist monitoring services has motivated the development of cloud-based solutions delivering data security coupled with connectivity-related latency issues. Among many such optimized services, AML Watcher offers you all-in-one solutions addressing the data sovereignty challenges.
Biometric Embedded Watchlist: Reduced Ambiguity
Saying your face is protecting your identity holds true when we delve into global watchlist screening systems being practiced. Taking mandatory identification measures, US Customs and Border Protection (CBP) has started collecting images of travelers upon exit. CBP is legally authorized to gather and share traveler data (facial images, fingerprints, etc.) with relevant stakeholders if needed, supported by the 2002 Enhanced Border Security and Visa Entry Reform Act (Pub. L. 107- 173). The implementation of biometric-enabled watchlists has enabled institutions to comply with regulations. Along with enhancing accuracy, reducing chances of false positives and negatives, and increasing reliability, a biometric-enabled screening enhances the customer experience while crossing the borders reducing the intervention cost of humans.
Optimized False Positives/Negatives: Fuzzy Score
Adherence to strict compliance policies carries a crucial place in running an organization free from financial crimes and the potential risk such threats carry with them. In the fast-evolving economies, a big compliance challenge is to have optimized processes since the scanning against complex money laundering activities, PEP lists, and enormous sanctioned entities have greatly challenged the efficiency of sanctions and watchlist programs. The efficiency of compliance functions is usually measured by the rate of false negatives/positives. Grasping the idea of a false positive, a wrong alarm is generated by the AML screening system when the entity entered for screening is not the one listed in the blacklist. The cost of human intervention rises, irrespective of the costly AML system one uses. The same applies to the false negative when the system fails to trigger an alarm against the suspected entity reflecting the effectiveness of AML screening systems. The solution to optimize the AML screening is not limited to one domain but comes with multiple techniques such as Biometric AML embedded in the system. However, the most reliable and practiced technique is the Fuzzy Score which analyzes two or multiple entries for potential similarity. The watchlist screening embedded with the optimum fuzzy score along with the biometric AML solution seems the reliable shield against money laundering and hefty fines.
Distributed Ledger Technology: An Emerging Innovation
In a vast data ecosystem, Distributed Ledger Technology (DLT) permits to validation, access, and update of the record stored across the distributed network where various networks participate. According to the World Bank, scripted in its FinTech Note. 01, initially implemented in the core cryptocurrency technology and crafted blockchain, LDT is catching the attention of FinTech experts to be implemented in watchlists or digital identity products. It allows authorities to develop a fraud-proof system where the flow and movement of commodities can be validated through trusted participants. However, the migration of longstanding IT systems to DLT can be costly along with the challenge of scalability.
Conclusively, it is on point to say that these innovations altogether make an AML watchlist screening powerful against the accelerated financial and cyber crimes helping the lawmakers and crime regulators in maintaining national and international security.