Tested against more than 200 actual regulatory lists and a range of global sanctions and Politically Exposed Persons (PEP) lists, spanning a six-year period from 2004 to 2009, Norkom found that with Smart Update financial institutions can reduce match and alert volumes consistently by between 20–40% without risking any reduction in match quality. This means a:
• 50-90% reduction in daily update processing
• 20-40% decrease in daily investigation effort
• 20-40% reduction in daily false positives with no additional false negatives
The next generation of Norkom’s innovative List Fingerprinting technology, Norkom Smart Update monitors every change in information provided in a watch list update or even potentially client data, reducing investigation effort without sacrificing match quality, the company says. It also eliminates the need for a financial institution to build large exclusion lists or “whitelists,” reducing investigator effort and minimizing the threat that a high-risk individual could be removed from the screening process by accident.
False positive rates remain a major area of concern for most financial institutions. The higher the false positive rate, the more time that is lost investigating each and every prioritized alert, which leads to escalating costs and increasing levels of frustration within investigative teams. In a recent Norkom study of global financial institutions, the results of which will be released in the coming weeks, findings indicate that, while financial institutions are making a concerted effort to reduce false positives, the majority report false positive rates of greater than 97%. This is in stark contrast to the 20% of respondents who desire a false positive ratio of one in five, and a further 20% who aim for a ratio of between one in five and one in 10.
Traditional approaches to managing alert volumes use algorithm thresholds in an attempt to reduce match volumes, which conversely increases the risk of missing important matches. More recent trends that classify matching records via a risk-based approach improve the situation, but still leave residual risks. Norkom’s new approach is a breakthrough in the management of global Sanctions and PEP compliance for both client and transaction data, says the company.
