KEY CHALLENGES

A law firm had been appointed as a Skilled Person to conduct a Section 166 review of various financial crime processes at an e-payments company. The law firm required support and subject matter expertise to assess the adequacy and robustness of the company’s sanctions monitoring. This included:

• The coverage of sanctions lists used by the company
• The calibration of the sanctions screening system, including thresholds and matching logic
• The adequacy of investigations undertaken to discount/escalate potential sanctions matches
• The adequacy of controls in place to maintain, update and test sanctions list data feeds
• The effectiveness of compliance oversight and quality assurance
• The adequacy of training and communications relating to handling potential sanctions alerts.

SQA PROPOSED SOLUTION

SQA Consulting rapidly put together a small team of experienced consultants to deliver this review.

Our Screening Assessment Centre was used to generate a number of test files formed of names from various sanctions lists from global regulators. The test files included over 50 different scenarios including variations of names and fuzzy tests to assess the effectiveness of the screening system. It also included scenarios to test the efficiency of the system by evaluating the number of false positives.

The team reviewed the Company’s documentation covering list management, alert management and investigation, controls and governance, training and communication and Quality Assurance and Oversight.

A range of interviews were conducted across the Company’s Compliance and Financial Crime Operations teams with both senior management and more junior team members such as KYC analysts.

Walkthroughs were conducted to observe key processes and controls such as how sanctions alerts were processed from the initial system alert, through manual alert reviews, escalation, investigation and external reporting.

A sample of alerts were reviewed to determine whether true hits would be identified and handled appropriately.

SOLUTION BENEFITS

• A report was prepared for inclusion in the Law Firm’s report to the FCA. This included observations and recommendations relating to:
• The effectiveness and efficiency of the screening system and how that compares to other financial institutions
• How the Company could be more selective in their use of sanctions lists to reduce the number of alerts
• How the screening system configuration could be improved to better identify fuzzy matches on sanctioned names
• The quality and depth of documentation of alert investigations and to the methodology used by investigators to more accurately determine if a hit was a true hit or a false positive
• Stronger controls that would improve the overall quality and consistency of alert management
• A greater emphasis on sanctions within the Company’s financial crime training and communications to improve awareness of the risks across the whole business. 

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