The world isn’t as big as it used to be, and it’s easier and easier for investors to move money around and invest in different things and in different places.
For those with good intentions, there is nothing to worry about. But the U.S. Department of Treasury Office of Foreign Assets Control (OFAC) has placed the burden on financial advisors and wealth management firms to put certain checks and balances in place to make sure your clients do indeed have good intentions and aren’t money launderers, international criminals, or even possibly terrorists.
This process of checking client names against OFAC watchlists tends to be an afterthought and often a very manual, tedious process. However, Skience has partnered with Electronic Verification Systems (EVS) to offer an integration that allows wealth management firms and RIAs to run automatic OFAC compliance testing checks as the account is opened.
OFAC Testing Background
It has been a dizzying past several years for firms who work with clients that often travel internationally for business and personal dealings. OFAC has rolled out more sanctions and what seems like constantly changing foreign policy when it comes to securities.You don’t have to be a newshound to have seen footage of yachts and other property belonging to the Russian elite being seized around the world following the Russian invasion of Ukraine.
In turn, OFAC has put more of an emphasis on firms and RIAs having the right compliance programs and processes in place in order to keep up. According to OFAC, typical issues that lead to sanctions include:
- Lack of a formal OFAC sanctions compliance program
- Misinterpreting or failing to understand the applicability of OFAC regulations
- Facilitating transactions by non-US persons, including through or by overseas subsidiaries or affiliates
- Utilizing the U.S. financial system, or processing payment to or through U.S. financial institutions, for commercial transactions involving sanctioned persons or countries
- Sanctions screening software or filter faults
- Improper or incomplete due diligence on clients and intermediaries, among others
- Decentralized compliance functions and inconsistent application of a sanctions compliance program
- Utilizing non-standard payment or commercial practices
- Individual liability, meaning that OFAC can take enforcement action against individuals that play integral roles in causing or facilitating violations.
In order to make sure your compliance program has the right tools and processes in place, OFAC recommends focusing on the following five components:
- Management commitment and support
- Risk assessment
- Internal controls
- Testing and auditing
- Training
The integration between Skience and EVS not only covers all five of the expectations outlined by OFAC but also improves efficiency and accuracy.
How Skience and EVS Make OFAC Testing Easier
The Skience platform is already designed around transforming the new account opening process. After all, the digital onboarding experience does a lot of the heavy lifting when it comes to setting your firm apart. This new bi-directional integration between Skience and EVS takes that to a whole new level.
Instead of requiring manual data entry at the end of the account opening process, which can increase errors and frustration, advisors can use the Skience Platform’s integration with EVS to automate the client due diligence process to perform real-time checks of OFAC and AML watchlists and fraud protection based on client demographic information.
In addition, this direct integration means users don’t have to vet and then run data through a third-party vendor.
“This integration enhances the new account opening process in a seamless, compliance-friendly manner,” Skience Chief Product Officer Christopher Zuczek said. “We know just how complex and tedious the vendor legal review process can be, but that’s because of just how important it is. Our integration will allow firms to minimize risk while streamlining the process of onboarding new clients.”
Get started with streamlining your OFAC testing before a client is onboarded with the Skience and EVS integration. Schedule a demo today!