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Best practices in sanction screening: Q&A with Temenos

By Microsoft Financial Services on July 6, 2017

Filed under Financial Services - Banking & Capital Markets

Adam Gable headshot imageWith financial crime on the rise and financial regulators cracking down, it is more important than ever for financial institutions to use effective, efficient, and flexible sanction screening that maximizes protection and minimizes impact on the business.

To learn more about how sanction screening solutions help financial institutions keep up with the changing market, we spoke with Adam Gable, Senior Product Director for Financial Crime and Treasury at Temenos, a market-leading provider of banking software systems.

For financial institutions, what are the main challenges and pain points in financial crime prevention today?

One of the biggest challenges that banks face in attempting to prevent financial crime is the huge volume of electronic transactions coming through every day. Digital transactions can already number in the tens of millions per day for a large organization, and that number is only increasing.[1] As banks deal with this increased volume, they face an increased risk of ‘false positives’.  These may be transactions from a legitimate source (i.e. not on watch lists) or transactions that have been falsely identified as related to potential sanctions breaches due to similar characteristics to genuine criminal transactions.  These false positives trigger an alert and require staff time to confirm they are not a threat. Banks with traditional screening solutions won’t be fast enough to ramp necessary resources or tune their filters to limit the impact from a sanctions screening perspective.

Another challenge, from a sanctions screen perspective, is that many banks don’t have the infrastructure to handle screening workloads on top of normal banking operations. Many banks currently run algorithms to screen transactions on the data in their core banking systems. The data processing involved places a heavy load on the core banking system, meaning that the algorithms can’t be run very frequently and the bank risks letting a potentially dangerous transaction slip through. With modern cloud-based detection systems, core banking and screening algorithms can be run in parallel, avoiding the negative impact on system performance.  The co-location of analysis and transactional data transforms financial crime mitigation systems of record into systems of insight.

How can banks improve the efficiency of their sanction screening practices?

The first thing they can do is switch to an automated system, which is vastly more accurate than manual verifications. Automation enables banks to catch sanctioned entities that may have slipped through manual know your customer (KYC) checks, while using fewer human resources. But you still have human operators checking flagged transactions, so you are still catching any false positives that do arise while avoiding the obstruction of legitimate transactions.  This is of course time consuming, but if you have a system with a low false positive rate, then this can be kept to a minimum.

Another thing banks can do with an automated solution is leverage big data and machine learning. With each transaction screened the system learns more – lowering your false positive rate even further. Automated data analysis can also uncover internal misbehaviour, like someone stripping relevant information out of transactions.

Overall, banks that switch to an automated sanction screening solution enjoy cost reductions, increased operational efficiency, and enhanced protection.

How is the cloud changing sanction screening solutions?

Moving screening solutions from on-premises installations to the cloud dramatically enhances their power and speed. Cloud computing is elastic enough to handle spikes in demand and heavy loads. The scalability and flexibility of the cloud enables banks to screen virtually limitless transactions in real time, while maintaining a low false positive rate.

Additionally, cloud infrastructure often comes at a much lower total cost of ownership than operating and maintaining a heavy on-premises IT footprint. Cloud customers pay consumption-based prices, so they are only paying for the processing they need. This reduction in operating costs allows banks to allocate funds to more profitable investments. With global spending on compliance set to reach more than $8 billion in 2017[2], it’s increasingly important to leverage the cost-effectiveness of cloud screening to protect the business without breaking the bank.

Why did Temenos choose to build Screen on Microsoft Cloud technology?

Temenos started collaborating with Microsoft in 2011 to put core banking services in the cloud and expand banking services to developing countries around the world. So when the time came to transition the Screen solution from on-premises to the cloud, Azure was the easy choice. Because of power of the Microsoft Cloud, Screen can deliver the scalability, flexibility and financial savings that banks need to provide their services to customers while maintaining compliance with strict government regulation.

What are the most important differences between Temenos’ Screen solution and other screening solutions?

The three most important factors that separate Temenos’ Screen solution from the pack are that it:

  1. Delivers one of the lowest rates of false positive alerts in the industry together with unrivaled detection capabilities as our customers report from benchmark tests.
  2. Makes it easy to manage unlimited watch lists: Screen supports public watch lists like OFAC, EU and UN as direct download from the regulators’ sites. Plus, you can use your own subscription with a commercial data provider, and you can upload your own bank-specific lists with names you do not want transact with.
  3. Provides intelligent, adaptive lexical screening that enhances security: Screen uses unique algorithms that accurately capture names regardless of spelling variations, misplaced or switched characters or any other method used to disguise sanctioned entities.

Try it today

As today’s financial technology trends become tomorrow’s banking norms, you need to make sure your bank is ready for the future. To find out more about the Temenos’ Screen solution, visit Microsoft AppSource today.

Read more on the Microsoft Banking & Capital Markets and Insurance blogs.

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[1] Temenos, A-Z of Banking Fraud, 2016
[2] PwC, Global Economic Crime Survey, 2016

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