Financial services firms sitting on compliance time bombs, despite recent high profile fines

UK financial services firms are sitting on compliance time bombs with regards to the UK financial sanctions regime, despite recent highly publicised fines and penalties, according to fit-for-purpose data and compliance screening specialists, Datanomic Ltd.  The findings are confirmed in the Financial Services Authority’s (FSA) latest report “Financial services firms’ approach to UK financial sanctions”, produced by the FSA’s Financial Crime and Intelligence Division (FCID).

Many companies still don’t understand the difference between simple anti-money laundering (AML) measures and screening against Her Majesty’s Treasury (HMT) list of sanctioned individuals and entities. The most common misconceptions amongst financial services firms include:

• Firms believing they are somehow exempt from the financial services regime because they only process low value transactions.
• Firms believing that individuals and entities on the HMT list were all based overseas.
• Small firms believing financial sanctions screening is unnecessary because they do not hold client money, make payments or because they deal in products which they assess as low risk for financial crime.
• Failing to understand the difference between financial sanctions targets and politically exposed persons (PEPs).
• Belief that insurance is a no or low risk area for sanctions or that UK financial sanctions do not apply to insurance.
• Belief that the funds of sanctioned individuals cannot be frozen because it may constitute ‘tipping off’. (Most listed individuals and entities are aware they are on the HMT list, which is publically available).
• Misconception, especially amongst small firms, that checks carried out for AML purposes will cover sanctions checks.
• Belief that financial sanctions is a form of FSA enforcement action, rather than a regime that is implemented, administered and enforced by the HMT.
• General lack of understanding and confusion relating to obligations under the Terrorism Order, Proceeds of Crime Act 2002 and other mandatory legislation.

“Even large organisations are misguided when it comes to financial sanctions screening with many firms assuming that their residual risk of dealing with a listed entity or individual is low,” said Simon Pearson, Director of Compliance Screening at Datanomic Ltd. “Firms are also failing to understand how their screening systems are generating matches in the first place. This is resulting in false positives, and more worryingly, false negatives, which are placing a huge burden on compliance departments that are struggling to cope. These misconceptions and the lack of understanding around screening technologies are exposing firms to enormous business and compliance risk.”

To address these issues, Datanomic’s dn:Director Sanctions & PEP Screening software enables organisations to rigorously and systematically screen their customers against Sanctions, PEP, money laundering, terrorist financing and other risk data sources.  Industry-leading accuracy and Datanomic’s unique ‘Decision Intelligence’ drive down compliance costs by reducing the burden of false positives. End-to-end data preparation, case management, workflow, auditability and reporting tools ensure that businesses are protected from compliance risk.  

A full copy of the FSA report on financial services firms’ approach to UK financial sanctions is available for download at http://www.fsa.gov.uk/pubs/other/Sanctions%20Final%20Report.pdf.

More information about Datanomic’s dn:Director Sanctions & PEP (Politically Exposed Persons) Screening software is available at http://www.datanomic.com/solutions/sanctions-pep-screening/

About Datanomic

Datanomic’s holistic approach to delivering fit-for-purpose data and screening accuracy enables its growing list of blue chip clients around the world to achieve a rapid Return on Investment, by exposing and correcting deficiencies in information their businesses rely upon, and by discovering potential regulatory and legislative compliance data issues in line with proactive risk management. Our clients come from a wide spectrum of industries including financial services, telecommunications, government, healthcare, utilities, professional services and engineering.

For further information, please contact:

Jeremy Jones
Datanomic Ltd
Tel: +44 (0)1223 228418
Email: jeremy.jones@datanomic.com

Vanessa Land
Devonshire Marketing
Tel: + 44 (0)870 242 7469
Email: vanessa@devonshiremarketing.com