Banks see greater AML risk as a result of sanctions

Encompass Corporation, the provider of the leading Know Your Customer (KYC) automation platform, today revealed polling data gathered from financial institutions that shows that banks have seen greater anti-money laundering (AML) risk and impact to their due diligence operations as a result of recent Russian sanctions.

To address AML risk, Encompass polling data also found that banks are slated to increase their investment in the digital transformation of their KYC process.

Encompass polling data found that 67% of financial institutions see greater AML risk in identifying beneficial ownership given the number of Russian entities, and that Russian sanctions were having a major (11%) to medium (89%) impact on their current customer due diligence (CDD) operations. Meanwhile, 73% of financial institutions are expected to make a moderate to significant investment in transforming their KYC/CDD operations.

“We’re seeing global financial institutions having to react quickly to new and broader sanctions against Russian entities and individuals, despite efforts dating back to 2014,” said Dr. Henry Balani, Global Head of Industry & Regulatory Affairs at Encompass. “Many sanctioned firms already know how and where to incorporate new businesses – to create shell corporations – that allow them to hide their identities and associations. This is creating more compliance risk as financial institutions look to onboard new customers.”

“Many financial institutions are still in the nascent stage of digital transformation initiatives and continue to rely on armies of analysts and cumbersome manual processes to perform due diligence,” said Catherine Warren, KYC Transformation Director at Encompass. “Recent sanctions – and the pressure that banks are feeling as a result – have brought this issue to the fore. Now is the time for banks to reduce risk while simultaneously improving their onboarding process by automating and digitizing their corporate KYC process.”

Encompass’ automated corporate KYC platform is proven 98% faster than manual processes, uncovering 4x as many entities and associations. Encompass is also able to search multiple sources concurrently, including global registers and premium data sources, providing live data and source documents.

Today’s news follows the launch of Encompass’ KYC transformation practice – a dedicated global team that was formed to help banks successfully implement digital transformation projects related to corporate onboarding, KYC, and CDD.