Reimagining Watchlist Screening: Improving Efficiency and Effectiveness with Modern Technologies

Growing regulatory scrutiny, continuously changing watchlists, and the complexities of an increasingly interconnected and international financial services ecosystem are exposing the limitations of traditional screening technology. Financial Institutions (FIs) are struggling to screen growing volumes of customer and transaction data against a variety of watchlists. Suboptimal screening techniques generate large volumes of alerts, an overwhelming share of which are false positives. Compliance analysts must then investigate and resolve the alerts. Lack of automated workflows in case management makes the investigation process highly manual and inefficient. The inefficiencies in the current screening approach have resulted in exploding costs of AML programs. In addition to ballooning costs, the inefficiencies are impacting client experience through delayed onboarding, slow or blocked transaction processing, and constraining of business operations.

FIs are turning to modern technologies to reimagine screening operations and enhance screening efficiency and effectiveness in a compliant and cost-effective way.

• The screening process can be vastly improved by the application of intelligent automation in data processing and matching phases. New technologies such as intelligent character recognition, robotic process automation, fuzzy matching, and natural language processing can greatly help in data cleansing, normalizing, standardizing, reconciliation, and unifying customer records and watchlist data.
• Solutions that support contextual analysis of data fields can significantly improve match rates. Modern solutions offer the ability to fine tune the matching process in a highly granular way. Culture-specific language processing is another key feature of modern solutions that can significantly boost screening performance.
• Analysis of very large datasets can be performed much faster by using a distributed search framework, which offers high scalability for in-memory processing on a network of distributed nodes.
• The cloud model has the potential to transform watchlist screening in several ways. It can optimize infrastructure usage, ease the complexities of implementation and regular upgrades, and reduce cost through multi-tenancy. The pandemic has accelerated adoption of cloud-based solutions, and the software as a service (SaaS) model is poised for exponential growth especially among small and mid-size financial institutions.

Beyond the efficiency and effectiveness improvements, modern technology-powered solutions promise to bring about a paradigm change in screening, such as through supporting near real time screening, converging transaction screening with fraud operations, and in many other ways. As a new era of hyper-digitalization dawns in the aftermath of the pandemic, it is now time to embrace new technologies to transform and disrupt screening.

This report was commissioned by Bottomline Technologies, but the analysis and conclusions are Celent’s alone.