The operational costs of sanctions compliance to financial services firms is doubling every four years, according to data compiled by interbank co-operative Swift.
Banks use sanction lists to screen against individuals, companies, governments and other groups including terrorists using SWIFT for
financial transactions. SWIFT is right - these lists are getting ever more
complex and larger as they take account of constantly evolving sanction
policies, criminal money laundering behaviour and the need to account for all potential misspelling and other variations.
However, it is very far from being the case that as sanctions increase, so operational costs HAVE TO increase.
Banks can do much more to mitigate against increased operational costs: Whether they like it or not, sanctions screening is going to remain a feature of international banking. Indeed the blizzard of checks is going to intensify, and become much more complicated
to check against. While the work is essential, clearly these are operational pressures that banks must alleviate if at all possible.
The reason banks can do more to mitigate the operational
costs is because too often they allow sanction screening to include too much manual intervention that could be automated. Also, embracing a rules-based approach to designing sanctions screening systems can enable banks to adapt to changes in sanction regimes
in a much more agile and cost effective way. If the rules are designed for maximum reuse (by stacking the rules – generic at the bottom and becoming more situationally specific towards the top) maintenance is significantly streamlined and costs reduced.
As a result, the banks who already lead the way in this
area by implementing these types of compliance strategies are playing a much more effective part in enforcing the rules critical to the fights against crime and terror, without it becoming an uncontrollable monster.
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© Finextra Research 2013