Rethinking the Whitelisting Approach in AML Compliance

The challenges of traditional compliance practices

In the challenging landscape of Anti-Money Laundering (AML) compliance, banks, Financial Institutions (FIs), and other regulated entities face the intricate task of customer roster screening. This process often results in a significant number of alerts that require manual resolution, consequently creating substantial backlogs and overwhelming workloads.

FIs, in their quest to mitigate these challenges, have adopted a practice known as “whitelisting”. This involves clearing a name or entity as “verified,” after which it is exempted from future screening processes, including those against updated data.

The risks of whitelisting

Though whitelisting may seem like an efficient solution, it carries with it considerable risk. Entities cleared today could end up on sanction lists tomorrow, due to new information that identifies them as sanctioned persons. This can lead to substantial penalties, as exemplified by the case of ING Bank. After whitelisting several individuals who were later revealed to be sanctioned ISIS terrorists, the bank faced a staggering fine of 750 million Euros.

Introducing Fincom's Alert Suppression Mechanism

To counter this issue, Fincom has developed a smart Alert Suppression (or Persistence) mechanism. This tool eliminates the need for risky whitelisting and drastically reduces alert rates. 

This smart automation for past approvals management ensures constant monitoring of historical vs. current data and reduces the overall false alerts rate to <1% (over time). 

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