The Long-term Costs of Choosing the Wrong FICA compliance solution

Financial Intelligence Centre Act (FICA) compliance is crucial for financial institutions to mitigate risks related to money laundering and terrorist financing.

Compliance requires effective monitoring of Adverse Media, Sanctions and Politically Exposed Persons (PEPs) to identify high-risk individuals and entities.

One of the primary factors that contribute to the high costs of FICA compliance is the selection of the wrong FICA screening provider. Many solutions may offer low initial costs, but their data sources may not be comprehensive or up to date, resulting in missed risks and increased compliance costs.

Failing to identify high-risk individuals and entities can lead to regulatory penalties, reputational damage, and lost business opportunities.

Failure to fulfill customer due diligence obligations could lead to a financial penalty of up to R10 million for a natural person or R50 million for a legal person

Additionally, the time and effort required to manually update and screen watchlists and adverse media data sources can be substantial.

Another cost factor is the quality of the FICA compliance screening software. Inexpensive software may offer limited functionalities, poor user experience, and lack of technical support, which can lead to increased training and support costs.

Poorly designed software can also lead to human errors, resulting in missed risks and compliance violations.

To avoid the long-term costs associated with selecting the wrong FICA compliance screening partner, financial institutions should consider the following:

1. Comprehensive and up-to-date Adverse Media, Sanctions, Politically Exposed Persons (PEP), Foreign Prominent Public Official (FPPO), or Domestic Prominent Influential Person (DPIP) databases.
2. User-friendly and customizable software that meets their specific needs.
3. Technical support and training to ensure smooth implementation and ongoing compliance.
4. A proven track record of successful implementations and compliance with regulatory requirements.

In conclusion

selecting the wrong FICA compliance screening provider can be costly in the long run. Financial institutions must carefully evaluate providers and consider factors beyond initial costs to ensure they are getting comprehensive and effective FICA compliance solutions.

Failure to do so will result in regulatory fines, reputational damage, and lost business opportunities, as well as increased labour costs associated with manual monitoring and updates.

Discover HLBNGA’s Sanctions Screening and Monitoring Services.