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How better quality data improves sanctions screening

How better quality data improves sanctions screening

Compliance,
26 January 2022 | 4 min read

Find out more about screening guidelines for ISO 20022 as well as recent industry recognition for SWIFT’s sanctions screening services.

Sanctions screening practices are crucial to maintaining integrity within the financial system. Unstructured, poor quality data poses a barrier to building effective transaction screening and monitoring tools that mitigate sanctions and anti-money laundering (AML) risks. This can often result in increased manual intervention and significant delays in a payment’s lifecycle. 

To achieve effective and efficient transaction screening and monitoring, financial institutions need to focus on the quality and structure of data. They now have an opportunity to embrace ISO 20022’s richer, better data to ensure their systems and applications provide and map structured data for all parties involved in a transaction. 

Screening guidelines for ISO 20022

At SWIFT, we’ve been working on several initiatives to help sanctions practitioners leverage the opportunities of this richer and more structured data as the industry migrates to ISO 20022. One such initiative has been the development of screening guidelines for ISO 20022. 

In a recent podcast with Regulation Asia, Nicolas Stuckens, Head of Sanctions Initiatives at SWIFT, looked at how and why these guidelines were created, the challenges faced by banks today and how the screening guidelines address them.

Enhancing the efficiency and effectiveness of your screening processes

In the podcast, Nicolas explains how in the first quarter of 2021, SWIFT, in collaboration with representatives from 14 global and regional banks, formed a working group to assess the opportunities and challenges of ISO 20022 for transaction screening. The working group concluded that, if ISO 20022 is implemented correctly, the structure and granularity of its data can support a more targeted approach to screening and lead to further automation. This, in turn, will reduce the overall number of false positives and associated sanctions friction. 

The group found that, in order for this transition to be successful, each participating institution needs to undertake a comprehensive review of how ISO 20022’s data can enhance their existing compliance processes. 

In 2021, the group published its first set of screening guiding principles for ISO 20022. These have been fully endorsed by the Payments Market Practice Group (PMPG) and Wolfsberg Group.

SWIFT sanctions services recognised by Regulation Asia Awards 

SWIFT has also received industry recognition for supporting the community as it transitions to ISO 20022, taking home the ‘Best Solution in the PEPs and Sanctions Screening’ award at the 4th Regulation Asia Awards for Excellence 2021.This demonstrates the significant value the global financial community gets from our fully managed and securely hosted screening services. 

These services are now being adapted to help manage the migration to ISO 20022. For example, our Transaction Screening services enable users to harness the standard’s additional data fields to improve filter efficiency and effectiveness. For institutions yet to make the move to ISO 20022, Transaction Screening prepares the ground for a smooth migration of their messaging flows. 

Our Sanctions Testing Service

In addition to the transaction screening service, SWIFT’s Sanctions Testing Service (STS) helps financial institutions assess the effectiveness and efficiency of their sanctions filters. STS uses full list testing, rather than sample testing, to help banks identify issues in all their hits and misses. This enables them to continuously improve their sanctions screening programmes, reduce false positives, defend their risk policies, and demonstrate to management and regulators that their filters are working as they should be. In the context of ISO 20022, STS supports customers who wish to understand the impact of MX formats on filter performance and to plan for transition to the standard.

ISO 20022: A unique opportunity

The move to ISO 20022 promises richer data insights, enhanced payment standardisation and improved interoperability. Given the scale of the transformation, it will take significant time and investment. But, when fully realised, this is a unique opportunity for the financial services industry to collaboratively work towards a new, innovative model for safe and efficient payments.

 

Read more on ISO 20022       Read more about sanctions

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