International anti-money-laundering (AML) regulations are stringently policed, and no country - or organisation - can afford to be found contravening them.
This was according to speakers at the Innovative Systems Incorporated/FinScan Executive Forum, in Sandton yesterday.
The briefing highlighted the importance of full compliance with regulations relating to politically exposed persons (PEPs), sanctions lists and other risk categories, by trade and finance.
Mike Healy, senior consultant at ISI, highlighted examples of major fines and jail time incurred by companies and individuals found to have contravened international AML legislation. "Increasingly, fines are being imposed - especially by the US government - against financial institutions failing to screen effectively and doing business with sanctioned individuals and organisations.
"The fines are not the only cost," he added. "The cost of reputation and brand damage can also be significant in the case of non-compliance."
Speakers at the briefing pointed out that effective screening can be implemented at a fraction of the cost of the potential fines and reputational damage.
John Symington, director at Compliance & Risk Resources, said developing a risk-based approach to AML had resulted in an increasing focus on where to allocate the accountable institution's resources. "With a risk-based approach, you can spend less countering the lower risk and more on the high risk," he said.
Screening against lists of thousands, or even millions, of people on PEP and sanctions lists can be complex, they said. Starting with quality data and using effective screening tools helps simplify the task and reduces the risk of false positives, speakers said.
Healy said few companies ensure their data quality is maintained and monitored on an ongoing basis. Not only does this result in business opportunities being missed and customers becoming alienated, but it also puts them at risk of non-compliance. "At the core of effective screening is the ability to accurately cleanse and standardise both the original data and the list data, so that matching can be properly done," he said.
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