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Addressing sanctions friction in an instant payments world

Addressing sanctions friction in an instant payments world

Compliance,
7 October 2022 | 4 min read

Financial crime compliance is an increasingly complex and expensive process, and the reputational and cost consequences of falling short are significant. 

It’s especially challenging as transactions move internationally, because financial institutions must navigate different regulations and requirements across jurisdictions. This makes compliance an area of potential friction that can prevent payments reaching their destination quickly – even as consumers increasingly expect cross-border payments to be as fast as their domestic counterparts. 

Now a collaborative industry approach, involving SWIFT, aims to improve one important area of the process by creating more efficient sanctions screening for the financial community.

Understanding the market challenge

Sanctions screening is essential to the integrity of the financial system, but there is wide recognition that the system can be made more effective and efficient. 

Banks today screen transactions individually to check that there are no sanctioned entities involved, and because each manages its own technology and operations, this has significant costs for the industry overall. This approach has come under scrutiny as banks move towards instant processing to create better experiences for their customers.

The introduction of ISO 20022 will go a long way towards making screening more efficient, providing richer data on transactions and reducing false positives, but the screening process could be enhanced even further by reducing duplication. 

Other areas of financial crime compliance have shown what is possible when the industry collaborates on data, platforms and utility concepts – some examples being Transaction Monitoring Netherlands, Project COSMIC in Singapore, and the Fintel Alliance in Australia.

Exploring a centralised screening model

During 2020, an initiative was coordinated with a group of banks to look at opportunities to reduce sanctions friction. Out of several workstreams, the most transformational proposal related to the potential creation of a centralised screening model. 

Throughout 2021, the potential pros and cons of a centralised screening model were assessed with the conclusion that SWIFT could bring greater value to industry discussions as a partner, rather than as a convener.

Following extensive market analysis and a period of due diligence with a variety of partners, the decision was made to partner with Global Screening Services (GSS), the newly formed entity created with the support of the industry to provide a centralised sanctions screening filter leveraging the latest artificial intelligence and machine learning technology. 

Their support and expertise in delivering community-based compliance services means we’re in a strong position to bring this transformational approach to screening to market for the benefit of the entire financial community.

Tom Scampion, CEO, GSS

“The centralised GSS model has the potential to be transformational in terms of screening efficiency and effectiveness, and with the level of industry support for GSS there is significant chance of success which is very exciting for the industry,” comments Matt Hobbs, Head of Financial Crime Compliance Strategy at SWIFT

SWIFT will partner with GSS on solution design, providing expertise on security and data privacy, along with some more sanctions-specific support on RFIs and assurance. 

“We’re delighted to be partnering with SWIFT on this initiative,” comments Tom Scampion, CEO of GSS. “Their support and expertise in delivering community-based compliance services means we’re in a strong position to bring this transformational approach to screening to market for the benefit of the entire financial community.”

Supporting the entire industry

The establishment of GSS as a centralised screening service supports SWIFT’s strategic direction by providing banks with a more effective and efficient service than they have today, reducing friction in the process and enabling more seamless, straight-though transactions. 

GSS will complement SWIFT’s current Transaction Screening Service (TSS), ensuring that there is continued support for the entire community, regardless of size and geography.

“SWIFT and GSS are both seeking to remove friction in a bid to enable instant cross-border transactions. It’s clear that a collaborative approach to sanctions screening will benefit the whole community,” concludes Hobbs.

Find out more about our sanctions solutions

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