Watchlist data management should be at the top of the agenda for boards of directors at financial services firms, and board members should be asking their compliance teams important questions about their firm’s programme. 

Today, managing watchlist data in the right way can help reduce both operational and compliance risks, and support the success of digital transformation programmes. However, failing to manage watchlist data can result in potential regulatory fines, increased operational complexity and poor customer experiences.  

Below are 10 important questions that boards can ask their compliance teams about the quality of their watchlist data management programme, to help discern strengths and potential challenges: 

1. Do we have a data governance framework for our watchlist data?  

   Firms need to manage their watchlist data using data governance principles. This framework is crucial to best manage data quality. 

   
   

2. Who owns our watchlist data?

   Firms ought to have specific individuals and a defined hierarchy within the organisation who are responsible for the watchlist data that is used. 

   
   

3. How much time elapses between a government agency issuing a press release about a sanction change and our watchlist being updated?  

   It often takes as much as 24 hours, because commercial watchlist data providers can be slow to capture, process, and make the change.  This data-gap problem can be an open window for money laundering and other financial crimes. 

   
   

4. How automated is our watchlist management updating process?  

   Many firms update their watchlists manually, which increases the risk that a sanctioned individual will be able to conduct a transaction in the window between the publishing of the press release about the sanction and the firm being able to screen against this new data.  

   
   

5. How many watchlists are we screening against?

   Screening against multiple watchlists can take more time because of overscreening and result in an increase in false positives. 

   
   

6. How do our levels of false positives compare with other financial firms at the moment?  

   Higher levels of false positives necessitate additional time and resources from the compliance team for investigation. Having the right approach to watchlist data management can lower false positives. 

   
   

7. How much compliance and risk exposure do we have in our watchlist data management processes?

   Today regulators have increased expectations about the speed of updates and the quality of watchlist data governance. It is important to ensure firms meet these expectations.  

   
   

8. How well can we explain the way in which our watchlist data has contributed to screening outcomes?

   Many firms do not have sufficient transparency around how the watchlist data is used, and so cannot explain decision-making to senior management, the board and regulators. Explainability is becoming a key regulatory requirement.  

   
   

9. Do we have a single view of our customers to screen against?  

   Having to screen against multiple sets of customer data can also result in overscreening, with an individual client being screened multiple times against watchlist data. This increases costs and can result in additional false positives, and significant compliance risks.   

   
   

10. Can our current watchlist data management programme support our digital transformation plans?  

    For example, digital customer onboarding processes require the entire watchlist screening chain of activities to be automated, to ensure a smooth overall process and rapid outcomes for clients.  

    
    

Conclusion

Regulators – such as the UK’s Financial Conduct Authority – are paying increased attention to how well firms’ watchlist data management programmes operate. In addition, automated watchlist programmes are playing a much larger supporting role in client-facing digital processes. So, improving watchlist data management can contribute significantly to meeting the compliance and automation goals that align with the overall strategic vision that boards want their financial firms to be able to deliver. Therefore, understanding the current state of watchlist data management, and how that can be improved with the application of the right technology is essential.  

At Facctum, we provide a cutting-edge watchlist data management solution that addresses all the questions raised. If you're seeking a solution to ensure compliance with financial crime regulations to the highest standards, contact our sales team at sales@facctum.com.