Customer Screening

Customer screening is a crucial aspect of customer due diligence (CDD) in the financial industry, especially in the fight against money laundering (AML) and terrorist financing (CFT). The process involves gathering and verifying customer information, including name, date of birth, address, and other relevant identifying details, and checking it against various watchlists, sanctions lists, and other databases. These lists contain information about individuals and entities that are subject to economic or trade sanctions, politically exposed persons (PEPs), and other persons of interest associated with financial crime or terrorist activities.

The primary goal of customer screening is to identify and mitigate potential risks associated with customers by flagging those who pose a higher risk of involvement in financial crime, corruption, or other illegal activities. By screening customers, financial institutions can prevent financial crime, protect their reputation and comply with relevant regulations and laws. Failure to perform adequate customer screening can result in regulatory fines, legal penalties, and reputational damage.

Customer screening is a continuous process that should be performed regularly to ensure that the information about customers is up-to-date and accurate. Financial institutions can use advanced screening tools, such as artificial intelligence (AI) and machine learning (ML), to automate the process, minimise false positives and reduce the cost of compliance.

Screening a corporate entity involves the same basic steps as screening an individual. However, there are additional complexities because corporate entities often have multiple owners and layers of control. The screening process typically involves gathering information about the company and its ownership structure, as well as any relevant legal or regulatory information. This information can come from public sources like Companies House or from private sources like credit agencies. Technology solutions, such as FullCircl, provide advanced customer screening and onboarding capabilities, leveraging data from Companies House, Credit Reporting Agencies (CRAs) and supplementing it with further specialist data as well as automation tools to expediate the process.

Once this information is gathered, it is compared to lists of individuals and entities that are known to be involved in criminal or terrorist activity (see Counter Financing of Terrorism (CFT)). If there is a match, further investigation may be necessary to determine the nature and extent of the risk. In some cases, the company may be denied the opportunity to do business with a financial institution or other organisation due to its risk profile.

Corporate screening can be particularly important in industries like banking, credit and insurance, where the risks of money laundering, fraud, and other financial crimes are high. It is also important in industries that are regulated by government agencies, which may have specific requirements for customer screening and due diligence. By conducting thorough customer screening early in the customer relationship, financial institutions can reduce their risk exposure and protect themselves from potential legal and reputational harm.