Rapid growth in the number of transactions and watchlists mean that the operational cost of sanctions compliance is set to double every four years, according to a white paper issued by financial messaging provider SWIFT.
SWIFT reports that financial institutions are increasingly seen as the front line in anti-money laundering (AML) and the fight to combat terrorist financing. As a result, regulators worldwide have intensified their focus on banks’ sanctions compliance processes.
The paper demonstrates the scale of the operational challenge faced by the industry. SWIFT data reveals the growth in number of transactions worldwide. By correlating that with the rising number of watchlists, it estimates that the cost of sanctions compliance at financial institutions will double every four years. With banks under pressure to reduce costs as well as to manage their exposure to risk, having efficient systems and processes in place has never been more crucial.
The paper also outlines the steps banks can take to improve their sanctions compliance process and outlines the three most important characteristics of a successful compliance infrastructure: the ability to regularly test system performance, progressively improve system effectiveness and to encode group compliance policy as part of tests.
“Compliance with international sanctions is becoming increasingly complex,” said Nicolas Stuckens, manager, AML and sanctions initiatives, SWIFT. “Sanctions lists evolve daily and the number of transactions that need to be screened is rising rapidly. Banks are expected to keep up and tune their sanctions filter in line with their risk appetite, so it has never been more important that systems and processes are effective and efficient. The aim of this paper is to outline the challenges faced by banks but also to give them an idea of the framework for a successful sanctions compliance infrastructure.”
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