It’s estimated that over 90 percent of financial institution watch list alerts are false positives. An environment of over screening and a lack of technology are just a few pain points that financial institutions face when it comes to watch list management. Discovery sessions held by Pitney Bowes analyzed the sanction screening and watch list processes of financial institutions revealing multiple challenges facing the industry.
Data quality is the most crippling issue that increases noise for a financial institution and often causes false positives. Nicknames, shortened names, and maiden names are just a few examples of how data can be duplicated in a list when it is actually the same person. Duplication forces large financial institutions to sift through millions of data entries which cost valuable time and money. Over screening is another issue many financial institutions face which can lead to a massive amount of false positives. Screening technology such as AI can help reduce false positives and overall list management to ensure compliance.
“What we found that was by reducing the noise up front in the process, pre TMS and prior to an event ever becoming an alert requiring investigation, financial institutions could have a dramatic impact while improving the accuracy of the matches between the party and portfolio,” explained Jim Burnick, Financial Services Managing Director at Pitney Bowes.
According to Burnick, financial institutions are spending big on watch list management. Over $280 million was spent on compliance last year and another $15 billion in fines on sanctions for those who fell short. Sridhar Govindarajan, Director of FCC Solutions at Pitney Bowes offers some insight as to why data quality is so important. “If you’re not confident in the quality and content of your list, then you have to cast the net wider, which means there will be more alerts and you’ll use more resources for those alerts,” he said.
To ensure the quality of data and watch lists, Govindarajan urges financial institutions to improve their efficiency and effectiveness by following industry best practices. Simple steps like labeling data and understanding the data profile can affect the outcome. Simplifying complex lists is critical for an improved screening process and will alleviate some false positives. Financial institutions can use the findings of these discovery sessions as a basis for industry best practices in reducing noise in watch list management.
To learn more about the Pitney Bowes discovery sessions watch this webinar.
