Bookmark this on Delicious
Seed NewsvineClient Screening: Like looking for a needle in a haystack
Miami, FL, USA, February 28, 2008: In an era when they are being overloaded with Know Your Customer data, a phenomenon known as 'False Positives' are the bane of a compliance officer's life, according to Shaun Hassett.
False positives are matches that are incorrectly flagged as 'hits' by a financial institution's screening software but which, upon more careful review, are found not to be true matches. "Compliance officers can waste considerable amounts of their time and their employer's money sifting through database matches that end up being about someone other than the person they are interested in," said Hassett, who is the National Account Manager, Financial Services, for Illinois-based Accuity Inc., which is a leading provider of compliance-related data, software and services.
For example, in a customer file of one million records, a false positive rate of 5% means that 50,000 records must be reviewed before they can eliminated from the risk process.
"Regardless of the systems and processes deployed, screening customer information and/or transaction data for regulatory compliance and due diligence purposes generally results in producing few legitimate matches and often can produce a veritable wave of false positives that must be cleared," Hassett told OffshoreAlert.
"Review and disposition of these items often comes with considerable staff expense to review and document these matches before they can be released. Delays in completion of transactions due to the inherent nature of the review and release process can also adversely impact customer satisfaction. And more importantly, the greater the number of items to be reviewed, the more likely the opportunity to inadvertently release a legitimate match becomes."
Hassett described the processes used by compliance officers to screen a client's name against vast quantities of data as akin to "looking for a needle in a haystack". "The issue is how one can manage the size or numbers of haystacks to be examined without missing the occasional proverbial needle of true matches in these processes," he said.
For financial institutions, it's all about risk to reward, he said.
"Balancing the cost of deploying internal resources against the risk of penalties for non-compliance (both in terms of fines/assessments and in negative publicity and reputational harm associated with compliance failures) is challenging at best," said Hassett. "To optimize the overall screening processes to be implemented, it is important that organizations take a long, hard look at the various processes and procedures employed to allow more intelligent choices to be made concerning strategies implemented to reduce false positives."
Want to learn how to reduce false positives and improve your client screening process?
Register for the 6th OffshoreAlert Financial Due Diligence Conference this April 13-15, 2008 in Ft. Lauderdale, FL where Hassett will show attendees how to reduce false positives when screening clients against data.
"This session will explore ideas in this arena that attendees can take into consideration when examining ways to more effectively manage the data screening process," said Hassett.
For more information about OffshoreAlert's Annual Financial Due Diligence Conference, visit www.OffshoreAlertConference.com or contact Conference Director Naomi Comerford by telephone in Miami, Florida on +1 (305)372-6296 or by email at ncomerford@OffshoreAlert.com
.jpg)
