Financial Firms Run Real Risks with Legacy Sanctions Screening Software

Financial Firms Run Real Risks with Legacy Sanctions Screening Software


10 Oct 2022

The financial crime technology most firms have in place today is ageing quickly and needs to evolve. Incumbent screening tech stacks for anti-money laundering (AML) compliance have not kept pace with the increasing complexity, scale and velocity of new risks.  This creates substantial operational pressures that are grow larger with each passing month.

A rapidly changing world

A good example of this situation can be found in the volume of Russian sanctions that have been implemented since February 2022. The US has put in place 1,375 Russian sanctions, the UK 1,375, and the EU 1,143. This is 73% of all the sanctions against Russia issued since 2014[i]. Legacy technology-based AML screening technology simply cannot respond with agility to this pace, and so firms have had to increase compliance headcount to support their sanctions screening processes. However, this expediency is unsustainable because of talent shortages, rising salaries and increasing training costs. Without robust sanctions screening processes, firms are exposed to considerable compliance risk and operational risk, which could lead to significant social consequences, regulatory action, and reputational damage.

Legacy screening technology is creaking under its own weight for other reasons, too. For example, most of today’s screening software is located in on-premises servers. However, current digital transformation programmes mean that most firms are increasingly moving their data and business processes to the cloud. Also – as a direct result of the pandemic – many client processes are being automated through new FinTech approaches, often breaking down internal silos. Legacy AML screening software usually struggles to operate outside of the silo in which it sits, and to integrate with cloud-based data and new technology – for example, with new customer management systems or onboarding portals – to create enterprise-wide end-to-end processes that firms need to stay competitive.  

Now is the time

Logically, firms should be investing in cloud-based sanctions screening technology today to close compliance gaps, reduce risk and enhance their organisation’s ability to achieve its strategic goals through digital transformation. Ironically, it is the rapid pace of current change that has put many firms off from implementing a new AML screening platform. They say that they are waiting for a “quieter time” to do this. The reality is that there will never be a “quiet” time because the world has changed. Firms need to take a new strategic approach to financial crime compliance or risk having this important part of their infrastructure fall behind, and non-robust processes increase the risk of getting sanctions wrong – leading to enforcement action, including fines.  

Screening in the cloud

To meet the demands of digital transformation and today’s compliance environment, firms need to embrace a cloud-based approach for AML sanctions screening. Taking this path will lower IT costs without compromising security or performance. The cloud has big benefits, too. It is the best way to manage large or complex data volumes – a key requirement for today’s high velocity of sanctions issuance. Indeed, today’s screening platform should combine the cloud with a best-in-class core technology stack providing low-latency ETL and high-speed screening, capable of a million transactions a day.

Firms also need tools with high levels of self-configurability that can address requirements without product customisation or professional services. This enables firms to adapt to regulatory change quickly and easily in the future, without the weight of high cost installed software.

In addition, today’s screening platform should include APIs that enable the solution to exchange information directly with other systems, such as CRM platforms, no matter where those systems are located. This enables screening to overcome silos within firms – communicating and harvesting data across the whole enterprise at lightning speed.  

Financial firms that fail to invest in a cloud-based sanctions screening platform today are potentially significantly increasing the risks that they face, while also failing to meet the demands of digital transformation. Firms should think more strategically about sanctions screening technology and the benefits it can bring to their organisation today and in the future.

[i] Sanctions imposed on Russia by actor 2023

Sanctions Screening