{"id":4518,"date":"2020-06-02T05:24:19","date_gmt":"2020-06-02T05:24:19","guid":{"rendered":"https:\/\/13.239.146.144\/?p=4518"},"modified":"2024-06-04T13:16:31","modified_gmt":"2024-06-04T03:16:31","slug":"why-ongoing-monitoring-is-important-for-your-business-health","status":"publish","type":"post","link":"https:\/\/namescan.io\/insights\/why-ongoing-monitoring-is-important-for-your-business-health\/","title":{"rendered":"Why ongoing monitoring is important for your business health?"},"content":{"rendered":"

With advancements in technology and constant regulatory updates, it is hard to know if your business has taken all the precautionary measures to ensure you \u2018Know Your Customer\u2019<\/a>. Y<\/span>ou\u00a0<\/span>may\u00a0<\/span>have conducted due diligence at the time of customer onboarding<\/span>\u00a0as part of your Know Your Customer (KYC)<\/a><\/span>\u00a0<\/span>procedure.\u00a0<\/span>\u00a0<\/span><\/p>\n

However, d<\/em>oes a standalone\u00a0vetting process\u00a0or\u00a0a\u00a0one-off KYC\u00a0solution\u00a0suffice?<\/span>\u00a0Let us examine.<\/span>\u00a0<\/span><\/p>\n

Many businesses are exposed to high risks because of the nature of their activities and\u00a0customers. For instance, Financial\u00a0Institutions and dealers in precious metals conduct high-value\u00a0financial transactions with individuals and entities\u00a0across the world,\u00a0who could be\u00a0politically exposed\u00a0or\u00a0sanctioned. The risk exposure is high as\u00a0fund transfers\u00a0and invoices\u00a0are often\u00a0used to conduct illegal activities, conceal sources of funds and launder illicit money.\u00a0As customer profiles and business activities may\u00a0change over time,\u00a0businesses not only need to perform a one-off check, they also need to use an ongoing monitoring system<\/a> as part of the due diligence programme.\u00a0This is to ensure that risk profiles have not changed\u00a0in such a way that exposes the firm to\u00a0<\/span>non-compliance\u00a0and reputational damage.<\/span>\u00a0<\/span><\/p>\n

Ongoing monitoring ensures that business activities are current and consistent with the risk assessment at the time of onboarding. Many firms automate this process to periodically examine changes in the PEP status, sanctions and adverse media.\u00a0They\u00a0screen against dynamic up-to-date global databases for\u00a0monitoring any\u00a0changes in client risks and exposure.<\/span>\u00a0<\/span><\/p>\n

Ongoing monitoring is an important process for financial institutions and regulated entities\u00a0that\u00a0are required to maintain\u00a0Anti <\/a>Money Laundering\/Terrorist Financing\u00a0(AML\/CTF)<\/a>\u00a0programmes by the regulators governing their jurisdiction.<\/span>\u00a0<\/span><\/p>\n

What does ongoing monitoring involve?\u00a0\u00a0<\/strong><\/p>\n

Ongoing monitoring includes\u00a0the following processes:<\/span>\u00a0<\/span><\/p>\n

    \n
  1. Identification\u00a0of the purpose and nature of changing business relationships and\u00a0recordkeeping<\/li>\n
  2. Reassessment of client\u00a0risk based on business activities, transactions and geographies,\u00a0and updates to the PEP and Sanctions<\/a> databases<\/li>\n
  3. Establishing whether the client profile or activities are consistent with the KYC and risk assessment of the client.<\/li>\n<\/ol>\n

    Why do you need ongoing monitoring?\u00a0\u00a0<\/strong><\/p>\n

    Whether you are a small gaming establishment, a real estate agent, or an international money service business, you deal with clients who may be based overseas. So how do you keep track of the changing risks? How do you keep on top of compliance requirements and avoid exposure to financial crime and penalties? By having an ongoing monitoring programme in place that works like a sentinel looking out for your business’s health.<\/span>\u00a0<\/span><\/p>\n

    Here are some instances where ongoing monitoring helps your business revisit\u00a0your\u00a0risk management plans.<\/span>\u00a0<\/span><\/p>\n

    Change in Client Profiles:\u00a0<\/strong>\u00a0<\/strong><\/span><\/p>\n

    Client profiles change over time. A reputed\u00a0client,\u00a0with whom you do regular business,\u00a0may become a PEP by way of an appointment<\/a> in\u00a0a global banking outfit\u00a0or\u00a0by winning an\u00a0election for a political position. An overseas client may be featured in the updated\u00a0FINTRAC\u00a0watchlist or come up in adverse media searches because of high\u00a0profile embezzlement.\u00a0Another long-established client may relocate to a country in the EU\u00a0which is\u00a0regulated by 5AMLD\/6AMLD<\/a> and GDPR.\u00a0All of these are changes in client risk profile and\u00a0call for a\u00a0review\u00a0in\u00a0risk assessments and\u00a0compliance\u00a0approach.<\/span>\u00a0<\/span><\/p>\n

    Exposure to High\u00a0Risk or\u00a0Sanctioned Countries\u00a0\u00a0<\/strong><\/p>\n

    Most countries have lists of sanctioned entities or individuals with whom you are advised not to conduct business or maintain certain reporting norms. For instance, the OFAC list<\/a> bars American citizens from conducting any business activity with entities sanctioned in the SDN list.\u00a0 However, some countries may not feature on any sanctioned\/watchlist and yet are high risk for exposure to money laundering and terrorism financing. These are usually less developed countries prone to internal conflicts and frequently changing governments. A dishonest approach to financial crime influenced by political patronage has resulted in high levels of corruption and lack of regulation.\u00a0 Such countries require a customised ongoing compliance programme to prevent your business from being used for ML\/TF.<\/span>\u00a0<\/span><\/p>\n

    Risk\u00a0Assessments\u00a0of\u00a0Business\u00a0Relationships\u00a0\u00a0<\/strong><\/p>\n

    Business relationships with PEP or close associates<\/a>, clients on a watchlist or those belonging to a high-risk industry<\/a> or sanctioned countries, are deemed high\u00a0risk.\u00a0It is important to have\u00a0up-to-date\u00a0data when checking your customers for risk exposure.<\/span>\u00a0<\/span><\/p>\n

    Benefits of\u00a0Automated\u00a0Ongoing Monitoring\u00a0\u00a0<\/strong><\/p>\n

    Ongoing monitoring is an automated compliance process that ensures your business is up-to-date with any changes related to your clients. It also works as a feedback mechanism used by the management.<\/span>\u00a0<\/span><\/p>\n

    How\u00a0can\u00a0your business benefit?\u00a0<\/strong><\/p>\n