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Corporate Screening: Enhance the Regulatory Compliance 

International regulatory bodies design various checks to combat financial crimes. These measures assist companies in verifying their partner businesses and aid them in preventing money laundering and terrorist financing. The Financial Action Task Force (FATF) presents 40 recommendations for international companies to fight financial crimes. Upholding these will assist companies in enhancing their reputation and dignity to secure global financial ecosystem. 

This article will guide how corporate screening enhances regulatory compliance for financial institutes and organizations. 

Corporate Screening: Overview 

For business verification, the company must verify the partner entities’ identities and ensure they are not involved in illicit activities. Miscellaneous watchlist sanctions for screening exist, such as AML/CFT, KYB, SIEs, PEPs, and other government or third-party databases. These provide accurate results that show that their partner is not involved in financial crimes. 

In simple terms, corporate screening is a process of verifying a company’s identity and ensuring it is not involved in criminal methods. This is confirmed by screening valid information about the entity against watchlist sanctions. The rigid checks in the corporate screening provide accurate results and reduce false positives. 

Types of Corporate Screening 

Two types of corporate screening are usually used in financial institutions: the classic manual business verification and the latest automation technique. Both have their pros and cons. 

Traditional Business Verification 

In this process, companies manually gather information about the company and its ultimate beneficial owners. For that, business representatives visit the office and submit essential documents required according to onboarding entity policies. After that, the bank agent verifies the record submitted by the company, which is all done manually by human resources. This is time-consuming and costly for the onboarding entity. However, after verifying the identity, they also cross-check the documents from the watchlist sanctions, and it takes months to screen information against all regulatory bodies’ databases.

Automate Business Verification 

Technological advancement also modifies this process and offers financial institutes the opportunity to utilize machine learning and robust AI innovations. This assists them in gathering company information from anywhere, anytime. To verify the profile with accurate results through real-time data. Companies dont have to wait for the results. They can automate the corporate screening process, which provides them instant results. It also uses an algorithm to gather information about the company against the various watchlist sanctions databases. To ensure it meets against any of those owners or companies who are involved in financial crimes. 

Advantages of Corporate Screening 

Corporate screening has a significant impact on companies. This one step can prevent them from getting scammed. Moreover, it enhances the organization’s reputation and brand loyalty, directly impacting its revenue. Given below are some positive impacts of corporate screening:

Enhance Security 

Ensuring the partner business is not involved in illicit activities bolsters the company’s security and protects it from fraud in the initial phase. However, it is also a bottleneck for scammers to enter the global financial system. Most money launderers use fake IDs and counterfeit papers, and verification through automated KYB checks also discloses them. 

Regulatory Compliance 

As discussed earlier, companies such as banks, financial institutes, and insurance must comply with rigid obligations. Compliance with these laws, such as AML, CFT, KYB, and KYC, needs corporate screening and adequate derivatives. That can only be possible after the corporate screening, which ensures regulatory bodies that the company follows its obligations. This can avoid non-compliance penalties. 

Mitigate Fraud 

This also assists companies in mitigating fraud from scammers. The centralized reports, generated through the automated process, clear the company’s complex ownership structure. A transparent corporate structure provides in-depth results about the company and assists them in ongoing monitoring of the changing ownership of entities. By this, they can mitigate fraud in the initial step. 

Risk Assesment 

Corporate screening also assists companies in verifying the risk associated with the entity. Verifying the identity and screening against the watchlist sanctions onboarding company ensure the company’s risk levels. According to these risk-level companies, they can integrate the business and monitor its activities. If the company falls into a high-risk identity, it must follow enhanced due diligence derivatives. 

Summary

Identity verification is essential for companies to onboard legitimate businesses. However, guaranteeing that partners are not involved in illicit activities can not be achieved without corporate screening. The corporate screening background check ensures that partners are not involved in illegal activities. Watchlist sanctions screening also assists in compliance with the rigid regulations of AML/CFT. Corporate screening is compulsory to protect companies from money laundering and terrorist financing scams.

Sumana Das

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