AML Screening for Client Onboarding – Risk-based Approach for Due Diligence

Banks or financial institutions apply a risk-based approach for client onboarding and due diligence for the appropriate level of screening. The risk rating of these clients determines the required level of AML screening.

Clients across the globe may have different profiles, given the variety of businesses they handle. Probably, this leads to a complex situation for banking and non-banking financial institutions. They assign a risk rating based on this paradox. Clearly, this doesn’t cloud or fade the concept that ongoing monitoring has to happen.

KYC and AML screening throughout the client lifecycle from a banker’s perspective gives a major idea. Any person can be accused of fraudulent activities yet it remains an accusation until proven in the court. How do privately held banks view it? If a banker puts them in medium risk and applies risk-based screening to find no sanctions against the “accused” person, what should he/she do?

Here, the banker must apply a robust screening process with PEPs and Sanction lists to identify and mitigate any money laundering risk while meeting AML and KYC screening requirements. With enhanced due diligence or EDD, a financial institution can determine if the person accused of fraudulent activities is genuinely a PEP or being politically targeted.

Once EDD serves a clarification of no news about the concerned client of being arrested or charged by the law enforcement agencies, they can be put on the monitoring list for timely review and notification. However, this situation isn’t permanent and may adversely or dynamically change in the next 24 months. A bank or financial institution cannot haphazardly neglect or capture the direction for all the time. Therefore, a highly curated risk database helps.

AML and KYC screening software ensure different levels of screening for the categorized customer depending on the varying levels of risk. Whether client onboarding or customer screening or KYC monitoring, the organization sets upon the right path by following the protocols. This leaves no room for poor risk compliance or any other issue by the regulatory boards.

How to approve the AML and KYC Screening Software

With remarkable inroads in the field of technology & innovation, any business circumvents with the idea of implementing them. Since there is a potential investment in this line of activities, a business rarely tries to embrace new technology.

We should see the exporters for example. With the regulatory compliance in full throttle, exporters voluntarily prepared for the screening of customers, suppliers, partners, and more. Those who didn’t comply had a rough experience like that of criminal or administrative penalties, loss of export privileges, loss of reputation, and so on. The activities following the suit dampen an organization’s performance, reducing any long-term future to ashes.

Businesses should consult professional trade compliance consultants or experts in the matter. Subject matter experts offer their advice in the favor of implement the right software. However, one should follow case studies and reports for deducing what’s right and ideal for their organization. A future-proof solution guarantees a future!

Author Info:-

Linqs Inc writes about the risk-based approach for AML and KYC screening of clients. It highlights the importance of Customer Screening software for categorized screening and monitoring needs. With appropriate AML screening, banks and NBFCs can mitigate any chances of money laundering.

About This Author

linqs Joined: January 10th, 2020