Research has recently flagged a reliance on search engines for financial crime due diligence. This means that financial services professionals utilise search engines to evaluate financial crime and regulatory risk. LexisNexis Risk Solutions estimates that 79% of industry professionals are reliant on search engines making the vulnerable to missing out key information.
While search engines can assist in evaluating risk and identifying negative information associated with an entity (such as previous convictions), they carry a number of limitations which could expose organisations to greater risk:
Searches performed using a traditional web search engine don’t incur fees but can be very costly in manpower and resources and fail to identify significant information. Traditional search engines only cover the surface web, which represents a small portion of the World Wide Web
· Search engines do not retain audit trails which are needed for evidencing due diligence.
· Search effectiveness relies on the user knowing the right search terms and this can be a particular challenge when the subject entity is based in a non-English speaking jurisdiction, as vital searches then need to be carried out in the local language, as well as English. If financial services professionals don’t have the necessary language skills, there is a risk that valuable information could be missed
· Individuals exercising their ‘right to be forgotten’ limit what traditional search engines can index on the web so that organisations are left unaware of any related risks.
The research also uncovered that many financial professionals are not using all the tools at their disposal for effective Know Your Customer (KYC) and sanctions remediation processes. Only 44% use adverse media, and just 50% look at Ultimate Beneficial Owner data, both of which are key sources of information in helping to form a transparent view of the risk associated with individuals and entities.
Research also revealed that financial institutions are at risk of losing business as a result of inefficiencies across their KYC and sanctions remediation processes, with 70% of professionals citing customer friction as a leading concern. As customers demand faster approvals for financial services products, delaying these through inefficient processes causes elevated friction.
Michael Harris, Director, Financial Crime and Regulatory Compliance, LexisNexis® Risk Solutions, comments:
“These findings highlight a worrying dependency upon search engines to determine the financial crime and regulatory risk of customers, who could pose a real threat to financial institutions.”
“Commercial search engines, for all their worth, are not designed with compliance in mind. Combing through pages and pages of results is not only time consuming, but also leaves organisations open to a greater degree of human error. To effectively tackle the threat of financial crime, it’s critical that financial services professionals have access to technologies that deliver the intelligence required, in a format that allows for confident risk-based decisions to be made, quickly and effectively.”
“Platforms that combine technology and analytics to aggregate an expanse of risk data, such as adverse information from the Deep Web, into a single view can help financial organisations make confident risk-based decisions, fast. In turn this also improves the positive customer experience.”
