Does Your Screening Vendor Actually Have Real-Time Monitoring?
Monitoring is often touted as a table-stakes feature in compliance screening systems. However, many monitoring solutions are simply recurring screens on a set schedule, not built to provide proactive alerts to real-time changes in risk.
Understanding the difference between real-time monitoring and scheduled screening is crucial for compliance officers and professionals who rely on accurate and timely information to mitigate risks.
What is Real-Time Monitoring?
In compliance, monitoring refers to the continuous process of assessing risk associated with customers, suppliers and other business counterparties through changes in sanctions, PEPs, sanctioned ownership, adverse media and other financial crime risk indicators.
Monitoring enables companies – whether traditional financial institutions, fintechs or corporates with global supply chains – to comply with Know Your Customer (KYC), anti-money laundering (AML) and similar requirements to avoid violations and fines.
Real-Time Monitoring vs. Transaction Monitoring
Real-time monitoring and transaction monitoring are essential for effective risk management, but each is distinct and built to address different risks.
Real-time monitoring focuses on changes to legal risk – such as newly issued sanctions designations or adverse news about corruption — across a company’s customers or suppliers. It involves continuously assessing changes in sanctions lists to ensure a business does not inadvertently do business with a sanctioned party (other high-risk person, entity, vessel or other counterparty type).
Meanwhile, transaction monitoring involves reviewing transactions to identify suspicious activity. This typically relies on a set of business rules to identify activities associated with money laundering or fraud.
Why Real-Time Monitoring Matters
Real-time monitoring is essential because it provides automated, event-driven alerts to changes in sanctions lists or other financial crime watchlists, enabling organizations to respond promptly.
This is particularly important given the dynamic nature of global compliance lists, with sanctions lists updated frequently by different authorities at irregular times. This includes:
United States: The Office of Foreign Assets Control (OFAC) updated its sanctions lists 129 times in 2023, nearly once every two working days and frequently multiple times per day.
European Union: The EU’s sanctions list was changed 49 times in 2023, frequently with multiple list updates on the same day.
United Kingdom: The UK’s Office of Financial Sanctions Implementation (OFSI) updated its sanctions list 55 times in 2023, slightly over once weekly.
United Nations: Compared with other major sanctions issuers, the UN’s sanctions list was updated the least frequently, with only 16 updates in 2023. However, as a global sanctions list, immediate attention is required to comply with the UN’s sporadic updates.
How to Assess Whether Your Vendor Actually Has Monitoring
To determine if your vendor provides genuine monitoring, consider the following five questions:
1. Are Monitoring Alerts Real-Time?
Real-time monitoring requires alerts to be generated and sent as soon as a change is detected.
If your vendor’s alerts are not real-time, you may be exposed to risks during the interval between the manual sanctions list updates or the interval between scheduled screenings.
2. Can You Only Access Alerts Via A Queue (Pull, Not Push)?
In an effective real-time monitoring system, your vendor should be able to push alerts to you automatically without requiring you to pull them down in a batch at periodic intervals. A system that relies on you actively checking for updates does not provide true ongoing monitoring.
Note: Based on your operational structure and risk profile, batched alerts may facilitate alert prioritization and analyst workflows (for example, alerts generated overnight are collected in a single stream or reviewed in the morning).
3. Do You Receive the Same Recurring Alerts?
If you receive the same alerts repeatedly, it could indicate that the system is not effectively filtering out previously addressed issues. This redundancy creates alert fatigue, raising the likelihood of error in assessing new true positive alerts. Recurring unproductive alerts increase analyst review time and raise compliance costs.
4. Does the System Rely on Match Memory to Reduce Recurring Alerts?
Match memory is a feature designed to remember previous screening alerts and prevent duplicates. While this can reduce noise, it can also miss new changes in an existing sanctions designation. An actual real-time monitoring system intelligently identifies material changes in sanctions lists that result in new alerts instead of relying on a system architecture built around alert suppression.
5. Can You Tune Monitoring to be Risk-Based?
Effective monitoring systems should allow you to customize alerts based on your organization’s specific risk profiles. This includes adjusting the sensitivity and criteria for alerts based on different list subscriptions to ensure they are relevant and actionable.
Risk Coverage in Real-Time Monitoring
In addition to assessing whether your screening and monitoring solution is genuinely real-time, it’s necessary to ensure monitoring includes the risk data relevant to your organization. This includes:
Sanctions: Real-time sanctions monitoring ensures companies can comply with changing designations and avoid inadvertent engagement with restricted parties.
Politically Exposed Persons: Monitoring clients, suppliers or other counterparties for political exposure is essential to ensuring that risk ratings reflect the latest developments.
Sanctioned Ownership and Beneficial Ownership: Ownership records are updated irregularly. Identifying exposure to persons and entities within sanctioned beneficial ownership networks enables companies to comply with 50% Rule requirements in the US, EU and elsewhere.
Adverse Media: Real-time alerts for relevant negative news enable organizations to respond to developments pertaining to clients and counterparties quickly.
Export Controls: Restrictions on exports to designated entities have become a component of sanctions policy for many issuing countries(particularly since Russia’s invasion of Ukraine). Receiving accurate alerts to new export controls impacting clients or suppliers enables real-time compliance.
Facilitating Compliance with Real-Time Monitoring
Real-time monitoring is critical to a robust compliance program, enabling organizations to respond to changes swiftly and effectively. By asking the right questions and understanding the difference between real-time monitoring and scheduled screening, compliance officers can better evaluate their vendors and ensure they are equipped to handle the dynamic and ever-changing landscape of global compliance.
Castellum.AI provides real-time monitoring built specifically to meet enterprise-scale needs for global coverage. With Castellum.AI, you receive push alerts on changes to sanctions, PEPs, beneficial ownership and other risk data, ensuring you stay ahead of potential compliance issues.
Eliminate Recurring Alerts
Real-time monitoring enables businesses to stay up to date with the fastest risk alerts and most accurate and reliable financial crime risk data.
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