PRACTICAL SOLUTIONS
The three building blocks of a centralized compliance system
When it comes to watchlist screening, what is at stake in today’ s high-risk business environment? Well, in 2016, nonbank institutions received 90 percent of all Office of Foreign Assets Control( OFAC) fines, 1 with 50 percent of those fines totaling $ 500,000 or more.
Those numbers are the most recent evidence of an emerging trend that poses a unique threat to these organizations. While sanctions screening fines have always been part of the regulatory environment, the upward trend indicates that OFAC is beginning to specifically target nonbank institutions, with insurance, logistics and money services businesses among the hardest hit. With this sobering thought in mind, these businesses must prepare their internal systems for increased regulatory scrutiny.
However, that is easier said than done. Many of these organizations have separate teams managing various functions, so sanctions screening efforts are tedious and manual. Furthermore, data streams flow into the organization and collect in disparate systems that never connect, and customer data resides in disconnected platforms that never merge for a consolidated customer risk profile.
But this problem is not specific to nonbanks. According to a recent ACAMS poll, 73 percent of the respondents said they use two or more solutions for automated screening. This might be one of the reasons why 58 percent of respondents said a regulator or internal auditor challenged their methodology for conducting a sanctions risk assessment. 2
While every organization faces its own particular obstacles, they all face three main business challenges toward establishing a centralized compliance platform: creating a unified vision and corporate buy-in for compliance management; connecting disparate departments, systems and data feeds; and uniting all compliance functions into a single platform without having to start from scratch.
Creating a unified vision
As regulatory expectations increase, a constant tug-of-war ensues between an organization’ s compliance and operations groups. This necessitates a unified vision for managing compliance from an organizational perspective.
Naturally, the compliance group will have a lower risk appetite while remaining more averse to risk. For example, they will want the organization’ s compliance system to cast a wide net, identifying as many matches as possible. This requires a significant increase in the volume of data flowing through the system, as well as additional layers of oversight. However, this increase in volume creates a burden for the operations side, as extra layers of oversight require a steep uptick in the number of investigations of all of the additional matches.
Therefore, a consensus must be formed: Compliance and operations must come together to analyze data and metrics and to determine how to efficiently and holistically manage compliance. The result must instill confidence across business interests, from compliance to legal and the executive level, allowing each a customized view of their compliance data and common ground with which to make risk management decisions.
Connecting disparate systems
Unfortunately, many companies find that the responsibilities associated with compliance lead to a fractured internal compliance landscape; it is not uncommon for organizations to run multiple business functions that have separate compliance departments, processes and record management systems. While each department may have its own fully functioning sanctions system, their data may be inaccessible, incompatible or difficult to aggregate when a more comprehensive view or approach is needed.
1
“ Understanding OFAC: A Best Practices Compliance Guide for Businesses,” CSI, http:// csiweb. com / resources / white-papers / understanding-ofac-a-best-practices-compliance-guide-forbusinesses? utm _ source = Link & utm _ medium = Article & utm _ campaign = Acams _ IDRiskHub _ RC _ 06 _ FY18
2
“ The 2017 Hollywood Conference Polling Results Are In,” ACAMS Today, April 24, 2017, http:// www. acamstoday. org / 2017-hollywood-conference-polling-results /
38 ACAMS TODAY | SEPTEMBER – NOVEMBER 2017 | ACAMS. ORG | ACAMSTODAY. ORG