• What payment screening entails.
• Why it can pose significant challenges.
• How technology can help.

What is payment screening?

Payment screening is the process of analyzing, verifying, and validating every incoming or outgoing transaction. Its purpose is to understand the risk of impropriety or criminal activity in any given payment. By screening payments, FIs can rapidly decide whether to escalate a potentially illicit transaction or allow a legitimate payment to go through.

This allows firms to remain compliant with anti-money laundering and counter-terrorist financing regulations (AML/CFTF) worldwide while protecting their customers and themselves from criminal attempts to siphon money or abuse payment rails. Because of this, FIs of all sizes must be able to screen every type of digital payment, from standard credit card transactions to faster payment schemes like FedNow and Instant SEPA credit.

The difference between payment screening, transaction monitoring, and transaction screening

Transaction monitoring refers to all the activities an FI undertakes to observe, record, and respond to customer interactions with its services. Transaction screening looks at individual transactions, such as payments, before they’ve been approved to stop especially high-risk activity. Payment screening is a facet of transaction screening, but it only deals with payments before they are processed. 

Each screening process involves similar steps but can vary based on the specific risk factors involved in the transactions being screened. 

Payment screening regulations

Payment screening is necessary because FIs worldwide are subject to many regulations and recommendations to tackle criminal activity like money laundering, terrorist financing, and fraud.

These regulations vary between jurisdictions, but they invariably require that firms demonstrate a capacity to monitor and screen payments. Prominent regulations include:

• The Second Payment Services Directive (PSD2) in the EU
  An integral European regulation established in 2018 for electronic payment services, PSD2 aims to improve the conditions for more consumer choice while simultaneously reducing fraud. The call for Strong Customer Authentication (SCA) is central to its directive.
  Notably, the UK remains aligned with the guidelines and recommendations in PSD2 to maintain steady relations with the EU.

• The Electronic Fund Transfer Act (EFTA) in the US
  Several federal agencies, including the Securities and Exchange Commission (SEC), Federal Deposit Insurance Corp (FDIC), Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), as well as state-run agencies, oversee the regulation of financial activity in the US.
  However, EFTA has played a central role in establishing the rights, responsibilities, and liabilities of consumers and those who offer payment services.

• The Payment Services Regulations 2017 (PSRs 2017) in the UK
  This primary legislation governing payment services in the UK aims to improve consumer protection and competition among FIs. It’s changed the requirements for client documentation, communicating with clients, and offering assistance to victims of fraud.
  In line with the EU’s calls for SCA, the Financial Conduct Authority (FCA) set out further rules for banks and payment service providers in 2021 that establish this requirement.

• Regulations on the supervision and administration of nonbank payment institutions in China
  Coming into effect on May 1, 2024, new regulations will bring modern digital payment providers under the scrutiny and rules of the Ministry of Justice and the People’s Bank of China (PBOC).
  The rules aim to strengthen user information protection and the general protection of users in light of the recent popularity of hundreds of new payment services and providers in the region.

Common risks associated with payments

Some common issues to look out for when processing payments include:

• Identity theft: This is when a criminal steals personal information and banking details to make purchases online, masquerading as an institution’s customer.
• Friendly fraud: This is when a customer uses their own card to make a purchase but then disputes the charge with the FI without a legitimate reason to do so.
• Authorized push fraud: This is when criminals coerce or manipulate victims into depositing money into their accounts through unscrupulous means.
• ‘Clean’ fraud: This is when a criminal uses customer credentials to make a purchase but then uses stolen payment information to evade fraud detection protocols. It’s particularly hard to detect.
• Money laundering: This is when a customer or criminal makes payments as part of a larger conspiracy to obfuscate the origin or destination of money in a bid to make that money seem legitimate.
• Terrorist financing: This is when a payment is made to a specific party for the purposes of financing terrorist activity while disguising itself as a more innocuous transaction.

The core elements of a payment screening process

An effective payment screening process involves coordinating several different components. These include:

• A clearly-defined risk-based approach (RBA): As is the case with all anti-money laundering and counter-terrorist financing (AML/CTF) efforts, firms need to translate their risk tolerance into clear policies and procedures. Both what needs to be done and the thresholds beyond which this might change need to be laid out in explicit detail.
• Clean, up-to-date, connected data: To ensure optimal screening decisions are being made at scale, businesses need the data informing those decisions – customer histories, third-party inputs, sanctions data – to be reliable. This is particularly essential when trying to automate the payment screening process but just as vital for escalations.
• Updated employee training: Whether they’re implementing automation in the screening process or handling exceptions when they arise, employees need to be routinely trained in the most relevant procedures, scenarios, and regulations. It’s equally important that this training is constantly updated and aligned with the firm’s risk-based approach.
• Intuitive, intelligent technology: Payment screening software needs to update as rapidly as data feeds do while still being intuitive enough to ensure compliance teams can manage cases at speed. This requires a combination of automation and interface design.
• Continuous auditing processes: To continue improving the payment screening process, firms need an independent function dedicated to auditing every aspect of it. The goal should be to identify weaknesses, suggest changes, and oversee the prompt implementation of these improvements.

How does the payment screening process work?

Once the initial payment message has been sent or received, the payment screening process begins. The diagram below details how ComplyAdvantage’s payment screening solution works, and the process can be broken down into five distinct stages.

Stage 1: Customer authentication and data verification

During the initial stage of a transaction, it is essential to gather all relevant data related to the payment message for validation. This includes the transaction amount, information about the sender and receiver, their respective locations, and any other essential details required for the payment to proceed smoothly.

Similarly, it’s important to verify the authenticity of the customer credentials to ensure that only legitimate transactions are processed. Therefore, both sets of data need to undergo a rigorous authentication process backed by robust technology and security protocols to minimize the risk of fraudulent activities.

Stage 2: Risk-based customer due diligence

Next, a risk assessment needs to be conducted to determine the probability of criminal activity based on the various degrees of customer due diligence outlined in the firm’s risk-based approach and how they apply to the specific customer in question.

This involves an evaluation based on the customer’s previous patterns of transacting, generalized patterns in historical data that indicate crime, the jurisdictions in question, and any other notable suspicions.

Stage 3: Sanctions, watchlist and PEP screening

Then, businesses need to scan sanctions lists, watchlists, and politically exposed person (PEP) lists (maintained by regulators worldwide) to identify potential matches with the sender, receiver, or related organizations.If the payment is legitimate, these initial checks should take only a few milliseconds. However, if there is any indication of illegitimacy, then the case must be escalated.

Stage 4: Escalation

If any of the preceding three stages raises a red flag that warrants further review, businesses will then escalate the payment in question to a dedicated team that specializes in conducting enhanced due diligence (EDD) processes. If this specialized team agrees that the payment is suspicious, it may be declined at this stage. However, after further review, the payment may be approved for processing.

Stage 5: Reporting

Finally, if a payment, sender, or receiver is flagged as suspicious, the firm needs to supply the corresponding documentation to the relevant authorities immediately.

More importantly, businesses also need to maintain regular and detailed records of all these stages regardless of the outcome of any investigation for auditability and collaboration with regulators.

The challenges of payment screening

Payment screening helps FIs overcome some serious risks. However, given the complexity of all the moving pieces involved in these procedures, it brings unique challenges, including:

• Speed: Through the lens of customer experience, the biggest challenge with payment screening is that it threatens the speed at which customers can get what they want. The value proposition for digital financial services is increasingly about convenience, so legitimate payments need to be validated in milliseconds.
• False positives: Operationally, one big challenge compliance teams face with payment screening is being swamped by false positives. Inadequate screening errs on the side of caution and stops even mildly suspicious transactions, but this overburdens the compliance team and severely hinders most customers’ experience.
• Staying up-to-date with sanctions lists: One of the biggest challenges for payment screening is to be able to continuously update watchlists, sanctions lists, and PEP lists from around the world. A fast screening process is ultimately no better if it’s unable to keep up to date with the latest developments in international crime.
• The complexity of the process: For the compliance teams escalating and reporting on cases, payment screening can create a convoluted workflow, given the number of moving parts involved. Professionals can quickly become tied in knots between disparate data feeds and applications for cases, relationships, and reporting.
• Maintaining auditability: At a regulatory level, payment screening presents firms with an additional challenge in terms of documentation. Ideally, every step is naturally recorded and made available for later review. But in reality, many firms struggle to provide the kind of transparency auditors need.

The importance of technology in payment screening

Given these challenges, firms must leverage advanced applications of technology like artificial intelligence (AI) and machine learning (ML) to automate and scale aspects of their payment screening processes. By automating fundamental steps like customer authentication and sanctions screening, firms can come closer to that necessary balance between speed and security.

Even when cases are escalated and need manual review, software can play an integral role in providing compliance teams with an intuitive workflow for rapidly managing anomalies.

Similarly, software can help teams document the necessary parts of each screening process so that they don’t have to undertake additional retrospective effort when reporting to regulators.

Payment screening with ComplyAdvantage

FIs of all sizes rely on ComplyAdvantage for intelligent, swift payment screening at scale. The platform uses a proprietary search matching algorithm to extract the full name and date of birth (if available) of the entity to be screened against an up-to-date and human-validated sanctions database. Firms can customize the payment screening platform to screen any entity, not just the counterparty, as long as a unique identifier is provided. 

Among the top benefits experienced by firms using Payment Screening by ComplyAdvantage include:

• The ability to process 99 percent of transactions in under half a second through the use of data-optimized screening algorithms, cloud technology, and integrated data and case management.
• Reduced false positives using risk-optimized matching algorithms, allowing compliance teams to focus on real threats.
• System-wide updates every hour based on market-leading data from human-validated sanctions lists, watchlists, and PEP lists, even during crises.

The post What is payment screening? A complete guide appeared first on ComplyAdvantage.

An effective and dynamic partner

Given Australia’s stringent regulatory and audit requirements, Beem required a solution to help it stay compliant while screening high volumes of customers daily.

Previously, the company had struggled with several screening issues that were slowing down customer onboarding times, reducing customer satisfaction. Manual processes, for example, had led to a backlog of alerts, consuming too much analyst time.

To combat this, Beem needed a dynamic solution that offered effective customer screening services suitable for its business and jurisdiction. After searching the market, the firm met with ComplyAdvantage in 2019 and began a long-term partnership. 

“During the vendor qualification process, we were particularly impressed with the search levers, search profiles, and the easy application programming interface (API) integration that ComplyAdvantage offered.”
Jason Backhouse, General Manager Open Payments 

Reducing alert remediation times to increase efficiency 

ComplyAdvantage’s implementation specialists collaborated with Beem from the outset to understand its business model and unique challenges. Once they finished their deep dive, they presented the firm with a bespoke suite of solutions based on their findings.  

Before partnering with ComplyAdvantage, Beem was experiencing high match rates of eight percent. However, after adopting a risk-based approach using ComplyAdvantage’s customer screening and transaction monitoring solutions, Beem reduced its match hit rate to 1.2 percent by December 2023, contributing to a 10 percent increase in its AML program’s efficiency.

Automated workflows via ComplyAdvantage’s RESTful API were also introduced to improve the firm’s overall operational efficiency by freeing analysts’ time. This enabled them to resolve legitimate sanctions hits within one working day, resulting in faster onboarding and improved customer satisfaction.

Beem & ComplyAdvantage: Key benefits in numbers

• Lowered the time taken to clear new customers to within one business day.
• Lowered match hit rate to under 1.2 percent.
• Minimized time to clear new cases.
• Increased overall efficiency by 10 percent. 

Taking new risks

While both parties are pleased with the ongoing success of the partnership, new risks are always emerging. With this in mind, ComplyAdvantage’s customer success and Beem’s compliance teams continuously review their operational efficiency and hold enablement sessions to equip Beem with the latest product and feature releases – creating a positive and sustainable experience for its customers.

“Through our years of partnership, ComplyAdvantage has enabled Beem to perform at the top of our compliance game. Their commitment to excellence and our business allows us to focus on providing a better experience for our customers while maximizing security and trust in our platform and meeting the requirements of our regulators.”
Jason Backhouse, General Manager Open Payments

A collaborative approach, combined with ComplyAdvantage’s dedicated account management and support, has led to a thriving long-term partnership that has helped Beem save time, stay compliant, and continue to scale and grow as a business.

The post Beem boosts analyst efficiency and customer satisfaction with automated workflows appeared first on ComplyAdvantage.

“Today, where one actor’s position in ensuring payment transparency starts and ends is no longer as clear-cut as when electronic payments were almost entirely initiated via a regulated bank…through SWIFT messages,” explained the group. “Legacy payment infrastructure handles increasing volumes of data, and understanding by all stakeholders (including supervisors) needs to improve on how new actors, pursuing unique payment models, challenge payment transparency requirements.”

Payment standards, audience, and key changes

According to the report, the new standards are relevant for the following industries:

• Cross-border payments.
• Domestic payments.
• Fiat currencies.
• Payments.
• Debtor, intermediary, and credit agent payment service providers (PSPs).

The standards make several changes, including revising key terminology to encompass new types of PSPs – even those not regulated like traditional banks. It also clarifies the responsibilities of intermediary and beneficiary financial institutions (FIs), addresses some ways ISO 20022 may be able to support transparency, and provides diagrams to help the industry understand complex payment flows and their transparency challenges.

The standards lay out core responsibilities for critical payment sector stakeholders. These standards are extensive, but highlights include:

1. Payment market infrastructures (PMIs) – PMIs are the systems that make payments possible, such as settlements. The standards encourage several responsibilities, including defining core transparency and due diligence responsibilities for PMI participants, the intermediation levels participants will allow, and payment types allowed.
2. PSPs across the payment chain – Regardless of their role, all PSPs share certain core responsibilities. For example, they should not try to conceal creditor and debtor information from other involved PSPs. They should also ensure payment information is easy to understand for those involved and transparently communicate participants’ roles in the payment process.
3. Debtor agent PSPs – These are the paying, or “ordering,” institutions. Their responsibilities involve including payment message information required by the Financial Action Task Force’s (FATF) Travel Rule, conducting customer due diligence (CDD) and compliant recordkeeping, and clearly identifying payments as either cross-border or domestic.
4. Intermediary agent PSPs – These PSPs must ensure compliance with applicable regulators and, as far as possible, the FATF Travel Rule. They should also observe correspondence banking CDD principles for client PSPs and maintain risk-based anti-money laundering and combatting the financing of terrorism (AML/CFT) payment screening.
5. Creditor agent PSPs – These firms should perform CDD on their customers, observe regulatory AML/CFT compliance, and screen payment messages for signs of suspicious activity.

Next steps

Firms in the payment services industry – especially those involved in the above relationships – are encouraged to benchmark their current transparency practices against the Wolfsberg Group’s standards. The full paper provides in-depth detail and helpful visuals for understanding transparency challenges for more complex payment structures in the sector. 

Firms may also want to consult the FATF’s Travel Rule, also known as Recommendation 16, to understand cross-border payment best practices better.

The post Wolfsberg Group issues updated payment transparency standards appeared first on ComplyAdvantage.

Before working with ComplyAdvantage, BigPay had a manual, ad hoc screening process. It needed to implement a more efficient one – fast – to meet its regulatory obligations. The reliance on manual processes also meant the firm faced the challenge of cumbersome batch processing during its annual customer rescreening, something that became increasingly difficult as the firm – and its customer base – grew.

BigPay also needed a solution that could be tailored in line with its risk-based approach:

“We had issues with customizability, as most platforms offer a standardized list of searches. We planned to have full control over the range of lists we used depending on the use case, transaction type, and country.”

Ashwin Nazareth, FinCrime Operations & Disputes Principal, BigPay

Integrated, customized screening and monitoring

The firm needed a flexible, unified platform that could scale across multiple markets and handle volume spikes during periods of peak demand. But with its previous solutions, streamlining these complex processes wasn’t possible – it involved too many touchpoints and manual processes. What’s more, BigPay needed a solution to automate workflow processes for name screening and adverse media searches, freeing up analyst time for more in-depth investigations.

That’s where ComplyAdvantage’s customer screening and transaction monitoring came in. BigPay was able to custom-build a single proprietary interface connecting multiple tools, trackers, and databases via a single API. The financial services firm also set up unique screening profiles for its individual markets, providing proportional controls for different products and transaction types – such as remittance and e-money. Accessible search profile configuration and fuzziness fine-tuning streamlined the process of aligning with new regulations.

“We now have the benefit of researching sanctions, PEPs, and adverse media all at the same time from a large number of sources rather than using multiple tools and databases. The time saved comes from only having to research the alerts, rather than wasting time looking for them.”

Ashwin Nazareth, FinCrime Operations & Disputes Principal, BigPay

Collaborative risk management

Throughout the process, BigPay has been able to partner with its customer success manager at ComplyAdvantage, who applies industry-wide best practices to ensure the solution is performing well and saving time in key areas.

“Customer support has been fantastic, especially with a dedicated account manager who resolves our issues promptly and keeps us up to date on our account performance,” said Nazareth. This included advice on “where we should be focusing our innovation and technological enhancements. In fact, two of our major time-saving innovations came directly from recommendations during the account review cycles.”

In the next few years, BigPay wants to sharpen its focus on key typologies affecting virtual financial services, such as fictitious identities, mule accounts, and scams. Nazareth also noted the increasing importance of collaborative data in financial crime risk management, both within the financial services industry and between financial firms, law enforcement, and regulators. Trends like these will only increase the need for the kind of high-quality, holistic data ComplyAdvantage provides.

“There’s no other solution currently on the market quite like ComplyAdvantage,” commented Nazareth. “And what it can do, it does exceptionally well.”

The post BigPay improves analyst efficiency with integrated customer screening & transaction monitoring appeared first on ComplyAdvantage.

Additionally, implementing instant payment services into an existing tech stack can be costly and time-consuming, preventing many US-based FIs from making the transition. Over time, this has caused stagnation in the industry as each organization on both sides of a transaction must have the same technology in place to benefit from instant payments. As a result, real-time payments nationwide only accounted for one percent of all payments in the US in 2022.

In July 2023, the US Federal Reserve introduced an alternative payment service for FIs. Since going live, it’s been described by Forbes as a possible game-changer and “a safe and faster option that has government backing.”

This article explores the new payment service, how it works, and the benefits of the FedNow system.

What is FedNow?

FedNow is an instant payment service designed to provide individuals and businesses with the ability to send and receive money in real-time, 24/7. Described by the US Reserve as “a flexible, neutral platform that supports a broad variety of instant payments,” the system aims to enhance the speed and efficiency of electronic funds to be available for use within seconds rather than hours or days. 

American FIs that adopt the FedNow service can offer their account holders year-round instant access for transactions, including holidays. Initially, banks can use FedNow for account-to-account transfers and bill payments. In the future, additional features will be added, such as a request to pay, according to the executive of the FedNow program, Ken Montgomery.

What are FedNow’s main features?

The main features of FedNow are:

• Funds are available to the beneficiary within seconds.
• Available 24 hours a day, seven days a week.
• Functions at weekends and during public holidays.
• Available with participating banks and credit unions only.
• Only for use domestically within the US.
• Maximum transfer amount of $500,000 ($25,000 at launch).
• Default transfer limit of $100,000. However, FIs can choose to set their transfer limits.

Find out more about FedNow from the Federal Reserve.

How does the FedNow program work?

FedNow works like other interbank instant payment services, such as ACH payments. However, rather than going through the international clearing house as ACH payments do, FedNow payments will be cleared and settled instantly. FedNow will use the Federal Reserve’s FedLine network of over 10,000 FIs that already have Federal Reserve accounts. Payments will also be processed individually rather than in a batch.

With other types of payments, there is a “lag” behind the scenes, so while a beneficiary may get the money immediately (within business hours), it may not yet have been cleared and settled by their bank. This creates a situation where banks are exposed to credit risk.

FedNow has been designed with retail payments in mind. Other industries that may benefit from FedNow include real estate, automotive, and the gig economy. It may even be used to send money instantly to disaster zones in an emergency.

The FedNow service will adhere to ISO 20022 best practice, which aims to improve payment speed, traceability, and transparency.   

Who can use the FedNow service?

Any US FI can make use of the FedNow program, regardless of size.

Since 2021, the Federal Reserve has been running a pilot program with over 100 US banks, including the US Department of Treasury’s Bureau of Fiscal Service. 57 organizations signed up as early adopters and became certified before the FedNow launch date, including JPMorgan, Chase, BNY Mellon, and US Century Bank. These financial organizations have already been sending test payments to one another using the FedLine infrastructure.

One of the pilot participants, 1st Source Bank said FedNow will give them a chance to set themselves apart from the competition, and offer customers immediacy, which is a need “that surrounds us every single day”. 

The benefits of using the FedNow system

The core advantage of the FedNow system is the faster payments ecosystem it will facilitate, especially as adoption of real-time rails increases among FIs. 

Additional benefits include:

• Inclusivity: Open to any US FIs regardless of size or location.
• Convenient: Offers streamlined and rapid transactions.
• Enhanced flexibility: Gives firms and their customers greater flexibility in managing their money.
• Prevents fees: Customers can make time-sensitive payments and avoid going into their overdraft, and incurring late fees.
• Reduced risk exposure: Firms can significantly reduce their credit exposure and risk.
• Economic gains: Fosters competition across the payments space.
• Better business finances: Businesses can improve their cash flow and reconciliation processes.
• Optimized operations: Firms can increased efficiencies within their payments teams.
• Integrated fraud prevention: Fraud tools built in, such as the option for firms to set lower transfer limits.

Challenges of using FedNow

Following the FedNow launch, one challenge may be that not all US FIs are certified. To use the payment rail, firms must first complete testing and certification for the service, which involves confirming their ability to transmit and process ISO 20022 messages and attesting they can meet the requirements to operate in a 24x7x365 instant payments environment. As of June 2023, 57 organizations were named by the Federal Reserve as certified as ready for FedNow service. 

Other possible challenges of using FedNow include:

• Participation fee and fees per transfer.
• Will not support payments over $500,000.
• Can only be used within America – no international payment options at launch.
• Neobanks will not be able to offer the FedNow service to their customers.
• Banks with legacy systems may have a challenging integration journey.
• FIs will need to incorporate FedNow into their existing fraud management programs.
• FedNow will gain attention from fraudsters, according to Nick Stanescu, senior vice president and business executive for FedNow. However, the service will quickly evolve its suite of fraud prevention and detection tools by, for example, allowing firms to activate a setting that rejects unusual or suspicious payment based on observed patterns.

Key takeaways

FedNow’s network and credit exposure removal has the potential to revolutionize global payments. In response, FIs will need to be “fraud wise” which includes having strong transaction screening and fraud detection solutions, as well as educating customers about phishing and other scams. When assessing solutions, firms looking to utilize the FedNow system should make sure it is covered as a payment rail. For example, with ComplyAdvantage, firms can access comprehensive payment coverage, including FedNow, ACH, Swift MT, SEPA, Direct Debit, Faster Payments, and SEPA ICT.

The level of investment and support in FedNow from the Federal Reserve suggests that the instant payments trend is only going to grow.

The post What is FedNow? A guide for compliance officers appeared first on ComplyAdvantage.

• Accurately detects risks and explains why alerts were generated.
• Integrates across your compliance tech stack.
• Provides up-to-date sanctions and politically exposed person (PEP) data.
• Can be tuned internally without waiting on third-party assistance.

This article summarizes top payment screening vendors, how to assess payment screening software, and where key firms sit on the G2 GridⓇ for Anti-Money Laundering.

Payment screening software: 4 features to look for 

When evaluating payment screening software vendors, there are several features compliance teams should look for: 

1. Ability to manage real-time payment rails: The growth of real-time rails like SEPA Instant and FedNow means firms need a screening solution that can operate in real-time and scale as payment volumes grow. Daily screening based on managing transactions in batches will no longer be sufficient.  
2. Data quality: Geopolitical instability means sanctions lists are changing unprecedentedly. This makes the quality of vendors’ databases critical – particularly their ability to quickly and accurately update lists at short notice.
3. Effective implementation: Often overlooked in the evaluation process, an inefficient implementation can delay the roll-out of new products and/or compromise a firm’s ability to implement its risk-based approach effectively. Compliance teams should ask vendors for proof of how customers have rated their implementations.
4. Advanced capabilities: Beyond the payment screening software’s core features, what other capabilities does the vendor offer? Risk scoring, fuzzy matching, adverse media screening, and insightful data visualizations are all potential areas to inquire about.

Top payment screening software companies

1. ComplyAdvantage

The G2 GridⓇ for Anti-Money Laundering is a helpful way of measuring financial crime risk management vendors based on customer reviews. The G2 GridⓇ lists ComplyAdvantage as a leader in anti-money laundering.

Payment screening from ComplyAdvantage can be purchased as a standalone solution or leveraged as part of the broader ComplyAdvantage fraud and anti-money laundering (AML) risk detection suite. It allows clients to screen all major transaction types in real-time via a RESTful API and has four key benefits:

1. Market-leading data – We source from 140 global sanctions lists, 1200 watchlists, 244 PEP jurisdictions and monitor regulators directly for updates. Our sanctions lists are always updated so teams can screen against updated lists in as little as 60 minutes.
2. Intuitive interface – Data, screening engine, and case management are all integrated with one easy-to-use platform.
3. Support for all major payment types, including faster payments – Screening as fast as 150 to 500 milliseconds supports leading faster payment schemes (including Instant SEPA Credit, Faster Payments, and FedNow.) A single API call screens every element of a transaction in real time.
4. Configurable risk – Screen against multiple data points to avoid true positive misses for sanctioned banks or other intermediaries.

Top ComplyAdvantage Features:

• Real-time screening: Screen transactions in real-time to prevent delays and ensure efficient processing.
• Optimized algorithms calibrated to our data power fast, accurate screening flexibility, and higher straight-through processing (STP) rates.
• Tailored risk: Adjust the screening process based on your firm’s unique risk appetite and compliance requirements.
• Flexible integration: Integrate with various payment systems and data sources in batch or real-time.
• Robust reporting: Generate reports and provide insights to customers on screening results and any compliance issues.
• Flexible screening: Screen any payment attribute, including names, BIC codes, countries – even unstructured text fields.
• Customizable screening profiles: Apply tailored lists and fuzziness levels to different payment corridors – for a differentiated, risk-based payments approach.
• JSON RESTful API offers seamless integration. 
• Out-of-the-box integration with several core banking platforms.
• Flexible fuzzy logic and matching algorithms can screen using exact or approximate name matches.
• Real-time API or batch ingestion of customer transaction data.
• Comprehensive rules are set to screen transactions against sanctions lists, PEPs and RCAs, warnings & regulatory enforcement, fitness & probity, and customer-supplied lists.
• All-in-one data and platform solution integrated across the full screening stack – from data to screening and case management.

Companies that use ComplyAdvantage to screen payments include Currencycloud, Holvi, Raisin Bank, AZA Finance, and Qonto.

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2. LexisNexis

According to Crunchbase, LexisNexis Risk Solutions “provides information to assist customers in industry and government in assessing, predicting and managing risk.” Headquartered in Atlanta, Georgia, the firm has offices in 24 countries worldwide.

3. Hawk:AI

Crunchbase states Hawk AI is a “money-laundering detection & investigation platform.” Investors, including Sands Capital, DN Capital, and BlackFin Capital Partners, fund Hawk AI. It was founded in 2018 and has its headquarters in Germany.

4. Napier

According to Crunchbase, Napier is “a new breed of financial crime compliance technology specialist.” Founded in 2018 and based in London, the firm has secured investment from Crestline Investors.

5. FinScan

Crunchbase describes FinScan as providing “the most advanced sanctions list and PEP compliance solutions available to help financial services organizations.” The company was founded in 2008 and is headquartered in Australia.

How to measure success

While every firm will have different objectives and challenges with their payment screening software, success metrics should include:

• Protect the firm and its customers’ reputation. Payment screening software is critical to ensuring firms don’t enable payments to be sent to sanctioned individuals. 
• Deliver an outstanding customer experience. Customers expect to send and receive money in real-time – an effective payment screening solution can ensure AML checks are seldom the reason why this isn’t possible. 
• Effective internal processes. Intuitive workflows should allow compliance leaders to delegate resources, prioritize the greatest risks, and resolve alerts faster. 
• Integration with wider AML stack: To maximize the value of payment screening software, it should be implemented alongside other key AML programs, such as negative news screening. This will ensure a firm’s risk-based approach can be rolled out in an integrated, holistic way.

Next Steps: Explore Payment Screening from ComplyAdvantage

Discover why leading firms choose ComplyAdvantage for Payment Screening, and book a demo to see the solution for yourself.

All information sourced from publicly available websites is correct as of March 2024. If you’d like to request a correction, please e-mail content@complyadvantage.com and we’d be happy to review this with you.

The post The best payment screening software and companies in 2024 appeared first on ComplyAdvantage.

“[I]llicit actors within the construction industry are using shell companies and other tactics to commit workers’ compensation fraud and avoid payroll taxes,” explained FinCEN Acting Director Himamauli Das. “Today’s Notice provides information that financial institutions can use to remain vigilant in monitoring, detecting, and reporting suspicious activity.”

The Fight Against Shell Companies and Organized Fraud

According to FinCEN, the notice aligns with its ongoing efforts to curb the use of shell companies to conceal illicit activity, as well as with the Anti-Money Laundering/Countering the Financing of Terrorism National Priorities.

In line with the Corporate Transparency Act, in 2022 FinCEN issued a final rule requiring most corporations, limited liability companies, and entities created or registered for business in the US to report their beneficial owners to the regulator. FinCEN expects this rule – effective January 2024 – to support the current notice’s objectives by discouraging the use of shell companies to conceal illegal activity by actors including:

• Oligarchs
• Kleptocrats
• Drug traffickers
• Human traffickers
• Illicit individuals in the construction sector

Notice Details: Typologies, Red Flags, and Reporting

Although the notice addresses all financial institutions, FinCEN notes that the type of fraud and tax evasion it deals with primarily affects banks and check cashers. The scheme is typically a two-part process involving workers’ compensation fraud followed by tax evasion. 

A criminal entity typically creates a shell company posing as a legitimate subcontracting business with just a few employees. It takes out a workers’ compensation policy for those employees. Meanwhile, the shell company contacts real subcontractors with a much larger number of employees. The subcontractors can give their employees discounted (and fraudulent) access to the shell company’s policy for a fee. 

It also helps the subcontractors avoid paying payroll tax. The subcontractors write checks to the shell company instead of their employees, thus concealing that they’re for payroll. The shell company then either obtains cash at a check casher or deposits the money into its company account before withdrawing it in bulk. It returns this money to the subcontractors, minus a small fee, so they can pay their employees under the table and avoid taxes.

The notice outlines several red flags for this typology, including:

• Construction company customers that are younger than a year, have little to no online presence, and specialize in one type of construction trade.
• A non-US citizen without prior construction history who opens an account in the name of a construction company.
• Despite receiving large volumes of client payments, the customer account shows no evidence of paying payroll taxes.
• The customer receives deposits outside the expected amount for their account type, all from other construction companies and in multiple states.

The notice also reminds firms of their reporting requirements and information-sharing protections under the Bank Secrecy Act (BSA) and the USA Patriot Act section 314(b). Instructions on pages 7-9 of the notice include:

• An overview of suspicious activity reporting (SAR) requirements.
• Other BSA reporting requirements, such as currency transaction reports (CTR) and Form 8300 filing.
• A reminder of the information-sharing safe harbor under the Patriot Act.

Next Steps for Firms

Firms – especially banks and check-cashing institutions – may want to study the notice in greater detail to familiarize themselves with red flags for construction industry tax evasion and workers’ compensation fraud. 

To ensure they remain abreast of FinCEN’s most current guidance and requirements, firms can sign up for updates from the regulator.

The notice asks firms to report current information on payroll fraud-related activity to their local tax authorities or the closest IRS CI field office. For reports of information related to workers’ compensation fraud, wire fraud, or labor exploitation, contact Homeland Security Investigations at 1-866-347-2423.

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According to Chris Hemsley, Managing Director at the PSR, “The two aspects we’re consulting on now will help to strike the right balance between encouraging people to be careful when making payments, while ensuring they have confidence in knowing they’ll be better protected if they do fall victim to fraud.” The changes also seek to encourage firms to invest in helping customers.

The PSR invites industry professionals to contribute their views by September 12, 2023 on the rule’s provisions for consumer responsibility, as well as reimbursement maximums and claim excess.

Reimbursement Rule Requirements

The reimbursement rule targets APP fraud, which tricks victims into sending funds to a fraudster posing as a legitimate recipient. This can occur through the impersonation of a legitimate financial institution or fraudulent sellers who never deliver purchased goods.

According to PSR, the rule will:

• Require firms to reimburse most customers victimized by APP fraud.
• Split reimbursement costs equally between sending and receiving payment institutions.
• Add more protections for vulnerable customers.

When the rule comes into force in 2024, it will apply to firms including payment service providers (PSPs) and focus additional consumer protections on faster payments. Among other things, the document detailing the rule explains: 

• Which customers qualify for reimbursement. 
• Exceptions when firms don’t have to issue a reimbursement – generally, when the customer has acted fraudulently or negligently.
• Time limits for the requirement. 

Approval of the Financial Services and Markets Bill, expected this year, will provide the PSR with the authority to require firms to reimburse customers.

Industry Views Sought in Consultations

Through the consultations, the PSR seeks industry feedback on: 

• The regulator’s proposed approach to consumer responsibility (the consumer standard of caution).
• Its reimbursement limit proposal.
• The best way to structure claim excess – the amount a victim would have to cover in case of a reimbursement.

Consumer Standard of Caution Consultation

According to the PSR’s proposed standard, customers must meet three basic responsibilities to be eligible for reimbursement in the case of APP fraud:

• Pay attention to warnings – If the PSP gives the customer a specific warning before a transaction occurs that the recipient is probably a fraudster, the customer must take it into account.
• Report the scam promptly – A customer victimized by APP fraud must notify their PSP promptly, and within13 months.
• Share information – The customer must comply with their PSP’s reasonable request for information to allow them to assess the situation accurately and prevent unnecessary losses.

A customer shown to have failed in this standard of care through gross negligence would forfeit their right to reimbursement. However, the burden of proof would remain with the PSP.

Maximum Reimbursement and Claim Excess Consultation

Excluding vulnerable victims, the regulator has acknowledged firms’ right to levy a claim excess as encouragement for customers to conduct responsible transactions. The consultation invites views on the excess – including deciding factors and the most effective value structure, which could be fixed or a percentage.

The PSR also requests industry feedback on the proposed reimbursement limit of £415,000, which would match the current ombudsman service limit.

How Firms Can Respond

Firms in the payments industry – especially banks and PSPs – are encouraged to study the consultations in-depth and contribute their views on the outlined proposals. This will help the PSR ensure its policy reflects industry realities. It will also help firms become familiar with the details of their upcoming reimbursement obligations to customers.

Firms may also want to review their fraud and loss prevention processes to ensure they are taking vulnerable customer groups into account. This should include robust customer education and timely warnings to customers suspected of vulnerability to a scam.

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MAS Deputy Managing Director (Financial Supervision), Ms Ho Hern Shin, acknowledged financial institutions’ (FIs) indispensable role in reporting the suspicious activity leading to the raids. She continued, “Singapore remains vulnerable to transnational ML/TF risks and …MAS and FIs need to continue to work together to strengthen our defences against these risks.”

How STRs Helped Catch a Crime Ring

MAS and CAD facilitated the investigation due to suspicious transaction reports (STRs) filed by firms that had noticed suspicious activity. Thanks to the information, authorities identified a criminal group suspected of laundering the proceeds of foreign illicit activity, including fraud and gambling. 

Multiple red flags led the FIs to report possibly tainted funds, including:

• Suspicious flows of funds.
• Questionable source of wealth documentation.
• Other inconsistent customer information.

The regulator is actively communicating with the reporting FIs regarding the illicit activity. In addition to emphasizing the importance of FI cooperation and reporting of suspicious transactions, MAS has announced that it will crack down on firms discovered to have lax or noncompliant anti-money laundering and counter-terrorist financing (AML/CFT) controls. It reminds firms that it actively works with FIs to curb illicit activity.

Specifically, the authority announced it is conducting AML/CFT inspections of wealth management firms.

Laundering Millions through Luxury Goods

None of the individuals arrested were Singapore nationals or permanent residents. They are suspected of being part of an organized criminal network and came from Cyprus, China, Vanuatu, Turkey, and Cambodia. They face various charges, including:

• Using a forged document under Section 471 of the Penal Code.
• Forgery for the purpose of cheating under Section 468 of the Penal Code.
• Money laundering under Section 54(1)(c) of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA).

The police are still looking for eight additional individuals who have evaded arrest. Four more are assisting police with their investigation.

During the raids, Singapore authorities seized goods and cash worth close to S$1 billion. Items seized included:

• Cash worth over S$23 million, and two gold bars.
• Over 270 pieces of jewelry.
• Fifty luxury vehicles and 94 properties estimated at over S$815 million.
• Collectible toys.
• Over 250 luxury watches and bags.

During this ongoing investigation, more assets may be seized or frozen. 

Key Takeaways

MAS has reemphasized its high expectations for firms’ AML/CFT processes. All firms, especially wealth management firms, should ensure their current frameworks align with regulator requirements and their individual risk profiles.

Singapore authorities provide valuable resources to help FIs comply with these standards. The Singapore Police Force has released an in-depth list of key ML red flags firms can consider in their due diligence processes. 

In addition, firms are encouraged to consult the MAS AML resource page, which includes links to the latest guidance, notices, and guidelines, as well as STR forms, the AML/CFT Industry Partnership best practice papers, and details on Collaborative Sharing of ML/TF Information & Cases (COSMIC). 

Still in development, COSMIC will be an information-sharing digital platform allowing FIs to collaborate in tackling financial crime. 

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To combat evolving threats associated with the various sectors Payset serves, the company needed a transaction monitoring solution to evaluate risks associated with a client’s account and specific transactions. Additionally, the solution would need to perform pattern-level analysis across a range of data sets and timelines simultaneously and be able to immediately suspend all movement of funds on a client account as required.  

From seamless integration to sandbox

After partnering with ComplyAdvantage, Payset’s in-house development team collaborated with their appointed implementation manager to integrate the company’s data into its new transaction monitoring platform seamlessly. Following this, Payset was able to utilize ComplyAdvantage’s sandbox environment, where real-life transaction monitoring data could be screened to ensure any proposed changes were effective before altering the configuration of the live platform. Once live, Payset’s dedicated customer success manager provides ongoing expert guidance, ensuring compliance operations are aligned with wider business goals. 

In addition to the quick and efficient implementation process, Payset partnered with ComplyAdvantage due to its wide-ranging transaction monitoring rules library. The compliance team could deploy these individually and collectively within the company’s designated customer risk segments, meaning Payset can now take more of a risk-based approach in its analysis of transaction monitoring data.

Tailored fraud detection

With ComplyAdvantage’s Fraud Detection solution, Payset is now able to more effectively handle scenarios that pose a particular threat in light of the company’s offerings and the sectors it serves. These include:

• Smurfing
• Payment fraud
• Business trading fraud
• Financial investment fraud

Mackulin also noted the solution’s capability to detect transactions inconsistent with a customer’s risk profile, stated business model, and flow of funds presented during the onboarding stage. By implementing ComplyAdvantage’s advanced behavioral analytics, Payset can detect unexplained and inconsistent account activity and map out associations between multiple client accounts and counterparties. 

Efficiency gains

With ComplyAdvantage, Payset has experienced an improvement in the efficiency and effectiveness of its compliance team. In keeping with the company’s risk-based approach to compliance, the transaction monitoring alert process has allowed Payset analysts to prioritize and focus on the cases that require the most immediate and detailed attention. “We can now easily identify tasks and assign which ones need to be analyzed live or in retrospect,” said Mackulin.  

Additionally, thanks to ComplyAdvantage’s built-in report generation and data analysis tools, Payset can quickly summarize and assess its performance against various metrics. This information is then incorporated into the company’s senior management discussions to inform future strategy and decision-making.

Looking forward, Payset can update its platform in keeping with its ever-evolving transaction monitoring processes and working procedures. As the company’s client numbers and transaction volumes continue to grow, Payset is confident it has invested in a scalable solution and a long-standing partnership that will grow and adapt in tandem.

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