Screening of Names is a fundamental action that financial institutions & Fintech’s must perform as part of their AML compliance obligations, and this seemingly simple task is the main reason for the heavy fines by the regulators. The legal obligation for names screening is during KYC/KYB, almost every Transactions and On-Going (every time a sanction list is updated2-3 a week). Yet many companies have implemented simplistic solutions using string matching, rule-based solution and the famous Levinstien distance algorithm, which by all measures simply does not work – the proof are in the fines!
Even the regulator be it in the EU and US have noted in the laws and directive to implement new technologies, so to increase the screening performance and reduce operational cost. But financial institutions & Fintech’s keep on with the misplaced notion “it won’t happen to me”, “The operational cost is too high” and/or “The local regulator will support us” – it is actually happening to everyone and will current trend is that the regulator will be accessing better technology to ensure compliance. Fintech’s such as Payoneer just got $1.4 Million US Treasury/OFAC fine, which is a serious slap on the wrist and warning Fintech industry as get your business in order.
