Importance of Customer Screening for a Financial Institution

Banking and financial institutions sometimes face legal troubles and issues by establishing a professional relationship with some malicious customers. Due to the lack of proper customer screening facilities, those businesses fail to understand the risk of a specific client or a group of customers. This mostly happens when the person has a longstanding rapport with an organization or the officials have met the person personally. So, the “we know our customer” attitude of senior staffs of an organization may also be a red flag.

Though effective AML screening is one of the many panaceas, it is the most essential and crucial step to reduce the risk of damage to a business’ reputation. Screening is a very critical part of combating your business against financial crime. The sole purpose of customer screening is to get the clear risk picture of your customers (or any potential customer) and, particularly, to identify if they are:

• Subject to international sanctions

• Politically exposed persons (PEPs).

• Suspected criminals or a person having any involvement in any criminal activities.

• or, a threat to your organization's reputation.

We must also keep this in mind that customer risk may change over time. Even, A longstanding client who has been a low-risk can also become high-risk owing to financial woes, change of jobs, or any personal reason. So, regular screening practices are of much importance to keep all the legal issues of an organization at bay, until it’s too late.