OUR

POSTS

Financial sanctions: the pressure is on - part 3

Having a holistic client view has never been more important


  • The recent financial sanctions against Russia resulted in the net being spread wider, giving rise to much more Politically Exposed People (PEP) hits on Russian clients.

  • Firms will have to increase adverse media screening on Russian clients to include aspects such as association with sanctioned individuals, proximity to human rights abuses and war crimes and a range of other reputational issues.

  • There must also be an increase in the ‘nature of business’ checks on firms that might be exporting embargoed goods such as hi-tech and/or dual-licensed products.

  • In this third edition of a series of articles, the Lysis Group will highlight the importance of customer screening, and how we can assist firms to achieve optimal screening and monitoring.


The practical implications


The need to identify and to cease transacting with sanctioned individuals and entities (including entities controlled by sanctioned entities and persons) will add a significant amount of work to the customer screening process and will subsequently require blocking these customers from transaction systems. Firms that do not have a holistic client view will find it difficult to quickly identify which clients (many of which have complex ownership and control structures) have beneficial ownership that is rooted in Russia or have exposure to Russian PEPs.


Therefore, a significant effort is required to enhance PEP lists which will necessitate a bigger focus on identifying and mitigating PEP risks. Depending on the firm’s risk model, the result could include an increase in higher risk clients, if the PEP risk is viewed as part of the client risk or could result in an increase in risk-related PEPs to manage. In both cases, this will drive more frequent periodic reviews, higher screening requirements, more on-going monitoring, and intensified transaction screening.


Also, adverse media screening will be key to detect softer and more prominent risks that might increase a firm’s reputational risk such as a history of financial crime. Based on this, firms may choose not to deal with certain customers whose adverse media risks falls outside of the firm’s appetite tolerance levels. This is likely to increase the time spend on adverse media screening quite significantly.


Therefore, bringing effective technology and high performing teams together is a “game changer” in developing a successful screening and monitoring programme. An effective screening and monitoring managed service can enhance transaction monitoring controls if operated by experienced analysts who have a single focus rather than additional internal responsibilities.


Lysis Group has the expertise and infrastructure to assist


We provide cost-effective, expert analysts to carry out the daily monitoring of the controls relating to regulatory screening, thereby protecting your firm from any reputational, legal, and regulatory perspective.


Our managed service platform for initial screening and on-going monitoring requirements is in a league of its own. All our staff are experienced in AML, Know Your Client (KYC) and other financial crime requirements. Using industry leading software partners, Lysis can also screen legal entities and individuals against all global watch lists and sanction lists, either in bulk or individually.


Nick Kinloch, global head of Lysis Operations highlights the need for comprehensive customer screening by saying “The effect of the recent financial sanctions against Russia is bound to impact firms across the globe which is why having a holistic client view has never been more important”.

21 views