False positives in risk management processes create bias in your customer data and skew results. This makes it difficult to come to the right decision about individuals or companies applying for your products or customers already using them.
Too many false positives can make it hard to create accurate benchmarks of risky customer behaviour too.
At the moment, many people's buying and spending habits are different to say the least. Retail business customers might be changing what they invoice because they have pivoted their offering. Individuals will be completing more transactions online with different providers. These unusual behaviours might not be a risk, but they can create false positives that need to be managed.
Reducing false positives
It's important to lower the number of false positives, because they impact your overall exposure to financial crimes such as money laundering. Controlling false positives also ensures you don't turn away legitimate customers - especially when individuals need access to credit and other financial products right now.
There are other costs to your business of having high false positive rates in your transaction monitoring systems and decision making processes:
- Damage to your reputation
- Loss of revenue
- Fines for non-compliance
The aim of Risk and Compliance functions should always be to reduce the number of false positives. It's not realistic to expect there to be zero, however they can be efficiently weeded out. This delivers more reliable data more of the time.
Use automation to help
You can rely on people in your Risk or Compliance team being able to do the ‘sniff test’ to spot anomalies in behaviour. This certainly helps. When analysts do find issues, they can escalate those cases if a judgement call is needed.
But when you are dealing with large numbers of due diligence checks on new customers or renewal checks on existing customers, automation is a reliable way of reducing noise around the number of false positives returned in a process.
Risk management processes executing in PassFort, for example, can apply a false positive reduction service for several compliance checks. This enables you to filter out false positives returned by the data providers you use and focus in on true matches.
A help article in our knowledge base sets out step-by-step instructions for how the false positive reduction service can be used in PassFort in conjunction with your data providers.
Automation in this area of risk monitoring and management can help you distinguish between the customer's you want and those you don't; those who have changed their behaviour and those displaying risky behaviour.
Get in touch
If you would like to talk to us about automating your risk and compliance checks, or about reducing the number of false positives in your due diligence processes, please get in touch. We would love to hear from you.