How does automated real-time monitoring for PEPs, sanctions and fraud work?
VSiD outlines why automated real-time monitoring is a valuable tool in a law firm’s anti-money laundering (AML) and counter-terrorism financing (CTF) arsenal used to safeguard against reputational and regulatory risk
Automated real-time monitoring (RTM) of politically exposed persons (PEPs), sanctions and fraud provides a critical element for any organisation’s anti-money laundering (AML) and counter-terrorism financing (CTF) compliance requirements. This ensures that customers and related parties are continuously screened against global watchlists, sanctions list politically exposed persons (PEPs), and fraud databases throughout the entire business relationship, not just at onboarding.
What Are PEPs and sanctions?
PEPs (politically exposed persons) are individuals who hold or have held prominent public positions (e.g. heads of state, ministers, judges, military leaders) associated with higher risk due to potential involvement in bribery or corruption.
Sanctions are restrictions imposed by governments or international bodies (e.g. UN, OFAC, EU) on individuals, entities or countries which, if violated, may lead to severe penalties, including fines and reputational damage.
How does ongoing monitoring work?
Ongoing monitoring involves continuously screening customers, individuals or entities against updated sanctions, PEPs and fraud lists using automated global monitoring systems. Customer data — such as name, address or date of birth — is automatically added into the RTM system following an initial ID and KYC/AML due diligence check, as and when required.
Both individuals and or entities are monitored against external lists:
- Sanctions: OFAC, UN, EU, HMT, etc.
- PEPs: World leaders, government databases, commercial sources
- Fraud: CIFAS, Interpol, Adverse media and watchlists.
Real-time monitoring (RTM) and screening
Ongoing monitoring software automatically connects with internationally recognised and reliable data sources to screen customer data to instantly detect changes in customer status (e.g. newly appointed as a PEP, sanction or fraud).
Name matching and risk scoring
Accuracy is obtained through advanced fuzzy matching algorithms and filters to account for misspellings, aliases, name variations. Matches are risk-scored based upon the proximity of the match, customer’s geography, business activity and type of sanction or PEP. Accuracy is assured when the correct name, date of birth, address and or country of residence information is proved.
Alert, report and review
When a potential match is detected, RTM generates an immediate alert and report which is sent directly to the relying party such as a compliance analysis or money laundering reporting officer (MLRO). Generally, a true match would escalate to further enhanced due diligence (EDD) checks, or account closure.
Certified audit trails and reporting
Regulators require firms to retain a clear, time/date stamped, audit trail with all parties, actions and alerts fully logged, together with an associated PEPs, sanctions and fraud report. The report and audit trail can be submitted to all internal teams, relying parties and, if necessary, to regulators.
Why does real-time monitoring matter
It has become a mandatory requirement by most regulators across many industries and business sectors. Failing to comply can lead to regulatory fines and reputational damage.
The reason for such regulatory measures is to mitigate against risk by minimising and preventing association with high-risk individuals or sanctioned entities. An effective real-time monitoring system ensures continued compliance even as the customer’s risk profile evolves.
If you would like to know more about how to integrate VSiD’s solution into your workflow please contact our team on 0207 965 7479 or complete our website contact form here.
