Concerns about Sanctions Data Quality Increase under New SWIFT Cover Payments Standard

London - 26 October 2010

Dow Jones Survey: MT202 COV Viewed as Helpful to Compliance Despite Some Negatives.

A year after its introduction, the majority (78 percent) of compliance and payments industry executives believe the new SWIFT cover payments message MT202 COV is proving effective in reducing banks’ exposure to money laundering or terrorist financing activities. Banks are adapting, as half have updated their IT infrastructure to be able to send and receive MT202 COV messages. However, concerns have significantly increased about duplicate alerts, false positives and data quality, according to a survey conducted by Dow Jones.

In November 2009, SWIFT introduced a new message standard for coverage payments, the MT202 COV. The updated format was brought in to increase transparency around cover payments and includes mandatory fields for originator and beneficiary details. This additional information enables banks to increase the effectiveness of their anti-money laundering and sanctions compliance programmes.

Overall, concerns related to false positives, risk of false negatives, duplicate alerts, data quality and difficulty clearing alerts have increased significantly since the introduction of the MT202 COV. When respondents were asked about their level of concern regarding key issues when screening wire transfer messages, their concern rose across the board after MT202 COV took effect. Disquiet over the high number of false positives saw the largest increase, as 41% were “very” or “extremely” concerned about this issue in October 2009 prior to the introduction of the MT202 COV, while 66% said the same a year after the rule took effect.

Concern about the data quality issues of sanctions lists also jumped, as 58% of respondents identified this as an issue a year after MT202 COV took effect, compared to 41% when the rule was implemented. Concerns about the risk of false negatives and the high number of duplicate alerts also increased by 19 percentage points (from 41% to 60%) and 21 percentage points (from 32% to 53%), respectively.

“Headline-hitting record fines for sanctions compliance breaches and the transparency requirements of the new SWIFT cover payments rule MT202 COV have had a considerable impact on SWIFT's participants,” said Rupert de Ruig, managing director of Risk & Compliance at Dow Jones. “With 50% updating their IT infrastructure to be able to send and receive MT202 COV messages, it’s clear that banks are embracing and adapting to the new regime. However, with concerns increasing over duplicate alerts, the number of false positives and data quality, it is equally clear that banks now need to focus on optimizing the performance of these tools. Ensuring the quality, accuracy and completeness of sanctions lists and removing the duplication they contain is an operational imperative for effective screening and improve Straight Through Processing (STP) rates.”

Dow Jones’s Risk & Compliance business includes Dow Jones Sanction Alert, the only sanctions data feed optimized for international payments regulations; Dow Jones Watchlist, which supports Know Your Customer programs; and Dow Jones Anti-Corruption, a due diligence tool for earlier and easier identification of corruption risk.

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