Johannesburg, 28 Nov 2023
Enterprises offering financial services, especially fintechs, are required to monitor international watchlists for sanctioned individuals or entities. They are given the responsibility of ensuring they do not provide financial services to criminals or businesses associated with people on any watchlist.
This is a complicated and expensive task for any enterprise to manage, but with rapidly evolving data technology, managing these risks is becoming easier. It’s also helping fintechs to remain compliant and meet their regulatory requirements. At the heart of this watchlist monitoring is business assurance and anti-money laundering (AML).
These are two services offered by 4C Group to African enterprises and fintechs. International watchlists are updated regularly, sometimes multiple times per day. By using data technology and intelligent IT software, fintechs can compare their customer lists with watchlists and flag any potential criminal activities.
Why watchlists are important
Governments and other agencies are strict when it comes to international watchlists. Any fintechs found to be dealing with sanctioned individuals and businesses, whether intentional or not, face severe penalties, including fines, greylisting and forced closure. These watchlists should be used by fintechs to protect themselves and their own customers.
They provide a way for financial businesses to check their customer base and transactions against a list of known money launderers, terrorists, politically exposed persons and other flagged individuals. Not only is the fintech’s reputation at risk when dealing with sanctioned people and entities, but their customers can be exposed too.
Data technology improves watchlist management
Enterprises will face many challenges when tasked with watchlist monitoring. Besides the regular updating of these lists, fintechs also need to keep an eye on private and commercial watchlists for duplications. In addition, the lists need to be standardised for easier screening.
By automating these processes through data technology or managed services, fintechs can greatly reduce the amount of time these tasks take. Software will harmonise lists, remove duplicates and stay abreast of the regular updates. This same software can also be used to monitor customer behaviour, their transactions and their risk profiles.
This allows fintechs to build accurate customer profiles and flag any criminal activity instantaneously. They can launch internal investigations and, where necessary, assist authorities with their cases. By using these sorts of data technologies, financial services companies can improve watchlist management and lower their risk.
This will also resolve many downstream issues, particularly with false positive flags and incorrect alerts. By understanding their customers better and keeping up to date with sanctions lists, fintechs can improve their alerting and overall customer experience. Most importantly, this will ensure they remain compliant with local and international regulations and legislation.
Using the correct data
It is imperative that fintechs use the right data at the right time. Over recent years, compliance and regulatory expectations have changed. The speed at which regulators expect fintechs to update their watchlists has become almost instantaneous, which can only be done with software and up-to-date data.
Data is usually drawn from multiple watchlists, multiple sources and in multiple formats. Fintechs need to choose the right datasets and characteristics on which to build effective frameworks for AML and compliance. The only way to do this accurately and effectively is to use technology.
Whether fintechs decide to use a software as a service (SaaS) approach, build their own software or outsource to a managed services provider, the end result should be the same – instant alerting for various protocols and real-time watchlist monitoring. The goal should be improved efficiency, greater control and more accurate flagging of potentially illegal transactions.
4C Group offers various business assurance services, including AML, fraud management and revenue assurance. Fintechs operating in Africa can benefit from these intelligent and automated services to ensure compliance and effective watchlist monitoring. If you’d like to find out more about these offerings, please contact us today.
At 4C Group of Companies, we strive to effect operational changes and cost savings for customers through our iNSight product and associated services. This product’s main function is to re-purpose and deliver business-critical information to a variety of systems and stakeholders.
We specialise in information management, business assurance, fintech solutions and a variety of cyber security services. For more insights into our products and services, check out our blog page or follow us on Facebook, LinkedIn and Twitter.