Guide to Payment Screening: Insights for 2024
In the ever-evolving world of financial transactions, two key measures – transaction monitoring and payment screening – play a crucial role in detecting and preventing fraudulent activities, sanctions evasion, money laundering, and terrorist financing.
Payment screening is a financial security measure used for fraud detection and regulatory compliance. It involves assessing transaction details such as size, timing, and parties involved, and employs advanced algorithms and machine learning to reduce false positives. The process includes data collection, rule-based screening, real-time analysis, scoring and risk assessment, manual review, and documentation.
On the other hand, transaction monitoring is a process that involves ongoing analysis of a customer's entire transaction history. It helps detect and prevent fraud cases, money laundering, and terrorist financing, and can also help reduce chargebacks, minimizing disputes that can harm customer relationships.
While both methods share similar objectives, they differ in their specific focuses and methods.
Sanctions payment screening is a specialized subset of payment screening focused on compliance with sanctions controls and legal prohibitions on payments, using real-time, rigorous blocking criteria. Its primary objective is to identify and block payments that violate international sanctions regulations, ensuring no funds are transferred to or from sanctioned individuals, entities, or countries.
Regular payment screening, however, has a wider remit. It targets multiple financial crime risks and operational concerns with more varied screening targets and possible outcomes. Regular payment screening encompasses parsing payment information, screening against a wider set of lists that may include Politically Exposed Persons (PEPs), adverse media, internal blacklists, and high-risk keywords or destinations.
In 2022, payment fraud led to $1.59 billion losses in the US alone, and global e-commerce losses to online payment fraud were estimated at $41 billion. These statistics underscore the importance of robust payment screening and transaction monitoring in maintaining the integrity of financial transactions.
Moreover, if a business suspects a case of money laundering, a Suspicious Activity Report must be submitted to the local Financial Intelligence Unit (FIU). Compliance with these regulations is crucial, as failing to do so can result in costly penalties and regulatory actions.
Sumsub's Transaction Monitoring ensures regulatory compliance, reducing the risk of such penalties and actions. It also generates valuable data and reports for trend analysis, audit trails, and regulatory reporting, making it an invaluable tool for businesses in the financial sector.
In conclusion, while both sanctions payment screening and regular payment screening share some similarities, they differ significantly in their objectives and methods. Understanding these differences is crucial for businesses to maintain financial integrity, comply with regulations, and protect themselves from financial crime.
Businesses must utilize both technology and advanced algorithms for payment screening, as it is a financial security measure that aims to detect fraudulent activities and ensure regulatory compliance by assessing transaction details and employing real-time analysis, scoring, and risk assessment. In the case of sanctions payment screening, the focus is specifically on compliance with sanctions controls and legal prohibitions on payments, while regular payment screening targets multiple financial crime risks and operational concerns. Both methods are vital in maintaining the integrity of financial transactions and avoiding costly penalties. In the business world, particularly in finance, the correct application of technology in the realm of transaction monitoring and payment screening is essential.
