In today’s global regulatory environment, the discretion exercised by regulatory bodies is crucial for ensuring compliance with sanctions, anti-money laundering (AML), counter-terrorist financing (CTF), anti-bribery and corruption, and other compliance requirements. This discretion extends to how and when organizations apply screening measures against watchlists, sanctions lists, enforcement actions, and other regulatory tools to mitigate risk.
The Importance of Screening Lists
Screening lists are essential for identifying organizations, individuals, vessels, locations, or cargoes that may pose regulatory or legal risks. Managed by governments, regulatory bodies, intergovernmental agencies, and financial institutions, these lists help ensure that businesses avoid interactions with sanctioned entities. Marcura Compliance understands that maintaining up-to-date sanctions and regulatory lists helps customers reduce exposure to fines, penalties, embargoes, and reputational damage.
One of the key challenges in screening is the potential for false positives and negatives. False positives occur when legitimate entities are flagged erroneously, while false negatives allow risky entities to evade detection. Marcura Compliance deploys advanced algorithms and relies on screening all data points through multiple sources of screening data in its false positive review to minimize these risks and ensure better accuracy.
Discretion in List Management
Regulatory bodies provide discretion in how organizations manage their internal and external lists.
External lists, such as sanctions from the UN, OFAC, EU, UK, or other regulatory bodies, are considered mandatory based on an organization’s country of registration and operations. Many organizations also maintain internal lists to monitor specific risks, which might include entities that consistently generate false positives or that fall under the institution's risk appetite.
Marcura Compliance assists by managing internal lists on behalf of our customers, leveraging screening results from multiple sources to ensure that no hit is left unidentified. Managing these lists involves periodic updates and rigorous processes to ensure accuracy. Our list management system includes regular updates, frequent reviews, clear operating procedures for adding or removing entities, and enhanced controls, along with quality checks to prevent oversight and alerts. Effective list maintenance ensures that our customers can operate efficiently without overlooking risky counterparties and their locations.
Discretion in Enforcements
Regulatory discretion sets thresholds for enforcement, allowing regulators to balance enforcement with practical concerns and advising companies on screening requirements. Marcura Compliance observes these recommendations to adjust our screening processes and highlight them according to our customers’ internal risk appetite via screening list customization, country customization, and alert customization.
In this ever-evolving regulatory environment, customers can balance regulatory discretion by leveraging Marcura Compliance and deploying screening customizations. This approach minimizes compliance risks while effectively navigating regulatory challenges.