Which Businesses Need to Screen Their Customers?

Customer screening is the process of dynamically assessing and comparing the data you hold on customers, prospective customers, and counterparties that are held within external data sources. It includes sanction lists, PEP lists, watch lists, and adverse media for risk management. 

The key objective of customer screening is to manage the risk of doing business with “bad actors” or “prospective customers'' who pose an elevated risk of criminality. For example, the application of enhanced due diligence involves PEP and for that appropriate action is to be taken to manage the risks involved.

The principal aim of customer screening is to superintend your organization’s exposure to money laundering, other forms of illegal money matters such as bribery, terrorist financing, corruption or tax crimes, etc. 

On the contrary, Customer screening is mandated by AML (anti-money laundering) laws in most countries. It extends to all businesses operating within AML regulated sectors including banking sectors, finance, law, corporate service providers, real estate agents, etc.  However, it is just not AML regulated sectors that prefer customer screening, but every business that wants to channel their money in sound directions understands the importance of customer screening. 

Customer Screening For Businesses

Customer screening has become quintessential in modern times more than ever. The types of businesses that are legally required to screen customers vary between jurisdictions. AML regulated sectors are present in all countries and other than that the businesses that fall in its ambit which mandate Know Your Client (KYC) obligations also work in the same direction. 

Screening also is widely employed by businesses that don’t fall into the AML regulated sector. It helps them to provide a shield against the risk of reputational damage or manage different forms of risk involved in predicate criminality. Sectors such as natural resources, pharmaceuticals, and armaments come down in such type of screening. 

Some of the businesses that are commonly included in this regulatory sector are-

• Company and trust administration business 

• Bank institutions 

• Money service organizations 

• Lawyers and legal advisors

• Real estate agents 

• Dealers which deal in high-value goods

• Gaming business 

• Investors 

Why does Screening Matter?

Breaching sanctions is a criminal offense in almost all jurisdictions which means doing business with a sanctioned individual or entity. From fraudsters to violent drug traffickers, they all target vulnerable people to create a trap through online scams. It’s their ability to run such activities that include illicit movement of money without getting caught and empower a vast range of criminal activities. 

To minimize such instances, screening is a critical and crucial first step in ensuring that businesses don’t become a part of conduit for criminal money. If customers are not screened then it leaves your business to host a number of consequences that bring together penalties, fines, and reputational damages from all directions. 

The Bottom Line

Now we all know why customer screening is so important and if your current screening provider fails to explain all this. Then there is time that you should explore the best customer screening services online and help your business to run fair and square under your eyes.