AML watchlist screening - a complete guide
This article explains how AML watchlist screening works, why it is necessary, and how businesses can ensure their screening process is both effective and up to date.
Financial crime is a global issue that requires effective tools to detect and prevent suspicious activities. One of the most important tools in the fight against money laundering and other financial crimes is AML watchlist screening.
By regularly checking individuals, businesses, and transactions against official sanction lists, companies can identify and avoid high-risk business relationships.
This article explains how AML watchlist screening works, why it is necessary, and how businesses can ensure their screening process is both effective and up to date.
What is AML watchlist screening?
AML watchlist screening is a process where companies and financial institutions check their customers and business partners against various watchlists.
These may include sanctioned individuals and organisations, politically exposed persons (PEPs), and other high-risk categories based on factors such as adverse media coverage or legal convictions.
The purpose of screening is to ensure that businesses do not unknowingly engage with high-risk entities. By implementing a thorough screening process, organisations can reduce legal risks, strengthen compliance, and protect their brand.
Sources for watchlists in AML screening
AML screening relies on data from various international and national sources. Some of the most significant include:
- EU Sanctions List – A register of individuals, businesses, and countries subject to EU restrictions.
- FATF’s High-Risk Countries List – A compilation of countries with inadequate measures against money laundering and terrorist financing.
- Interpol and Europol – Databases of wanted individuals, criminal networks, and other actors involved in financial crime.
- National Sanctions Lists – Each country has its own lists of individuals and businesses deemed a risk to the financial sector.
- OFAC (Office of Foreign Assets Control, USA) – A list of individuals and companies subject to economic sanctions by the U.S. government.
By using these databases as references, businesses can identify suspicious individuals and organisations and take action before establishing a business relationship.
How does AML screening work?
AML screening is performed at several key points to ensure that businesses always have up-to-date information about their customers and business partners:
- During onboarding – When a new customer registers, a check is performed to ensure they are not on any lists such as sanction lists, PEP lists, and law enforcement lists.
- Ongoing monitoring – Because risk-related information is constantly changing, businesses must conduct recurring checks to stay updated on any new red flags linked to their existing customers.
- Transaction-based screening – Payments and transfers can be analysed in real time to detect links to high-risk entities.
AML screening
Monitor high-risk customers
Automatically screen your global clients against the most up-to-date screening lists and onboard new customers while ensuring your business complies with regulations.
Key processes in AML screening
For screening to be effective, a structured process is required, where both technology and human expertise play an important role. The key steps in AML screening include:
- Data collection – Customer and transaction data are analysed to identify potential risks.
- Automated screening – Software continuously compares customer data against a variety of updated watchlists and sources, flagging potential risk indicators for further review.
- Manual review – False positives are filtered out through manual assessment by analysts.
- Reporting and actions – A relevant match may lead to risk classification, rejection, offboarding, or, in some cases, mandatory reporting to authorities.
Challenges in AML watchlist screening
AML screening is a crucial security measure, but it also comes with challenges:
- False positives – Many names are common, and up to 95–98% of flagged cases turn out to be false alarms. This highlights the importance of accurate data and efficient screening tools to avoid mistakenly flagging innocent individuals.
- Data quality issues – Spelling errors, alternative spellings, and translation differences can make it difficult to identify actual matches.
- Regulatory changes – Watchlists and laws are frequently updated, requiring businesses to constantly adapt their screening processes.
- International differences – Companies operating globally must comply with different regulations in various jurisdictions.
Understanding and managing these challenges is essential to ensure that the screening process runs smoothly and effectively.
How to check crime and sanctions lists
Businesses can conduct AML screening in different ways depending on their needs and resources:
- Automated screening tools – Software that compares customer data against updated lists in real time.
- Direct government checks – Public databases can be manually consulted for specific checks.
- Third-party services – External providers offer screening and analysis as a service.
- Internal procedures – Companies should have clear guidelines on how checks are conducted and documented.
An effective AML screening system combines automated technology with manual review to ensure that no suspicious business relationships are overlooked.
Conclusion
AML watchlist screening is a vital part of preventing financial crime. By systematically conducting screenings, businesses can avoid risky relationships and ensure compliance with applicable regulations.
With the right strategy and tools, screening becomes a natural part of a secure and responsible business operation. Combining modern technology with human expertise provides the best protection against financial crime and contributes to a safer financial ecosystem.
Want to learn more about improving your AML screening? Get in touch today for a tailored solution for your business.