Naughty or nice? The impact of Black Friday on financial crime screening


As sales volumes surge over the holidays, payment service providers need to scale their compliance operations to meet demand.

While consumers look forward to a weeklong frenzy of shopping around Black Friday, banks and payment service providers (PSPs) brace for a strain on payment systems and an influx of fraud and criminal activity.

Adobe predicts that nearly one in five dollars this holiday season will be spent between Thanksgiving Day and Cyber Monday, generating $23.4 billion or 19 percent of total online sales. Strength in the US job market and buoyant consumer sentiment is expected to see American shoppers spend at record levels.

Countries outside of the US are increasingly jumping on the Black Friday bandwagon and, in some cases, rivalling the magnitude of the annual event. Now in its tenth year, China’s Singles Day recently broke records by making $30.8 billion in sales during the country’s annual spending spree.

Bah, humbug!

Whilst these annual shopping extravaganzas are a lucrative opportunity for retailers, they can also cause a headache for the systems and operations that take the strain of the influx of shopping activity.

As retailers have had to revamp their e-commerce sites to handle the volume of traffic, banks and payment service providers prepare for the significant strain on the payment systems used to facilitate the huge volume of transactions.

The goals then become:

  • Finding new ways to cope with the surge in payments, whilst maintaining the service levels customers expect
  • Ensuring the essential financial crime screening processes required by law take place effectively behind the scenes, to ensure all transactions are compliant

Making a list and checking it twice

Banks and PSPs have an ongoing obligation to comply with AML-CFT and sanctions regulations. As part of their KYC process, they must screen their account owners (both buyers and sellers) to ensure they are not facilitating the flow of illegal funds. Failure to block any sanctioned entities or to detect any illicit financial activity could result in investigation, enforcement action and reputational damage.

On occasions like Black Friday or Cyber Monday, payment service providers can expect to face a boom in new business relationships, creating an explosion in the number of new customer accounts that need to be screened, prior to the provision of payment services. This is a challenging time for ongoing AML-CFT and sanctions compliance.

As part of their AML-CFT processes, the bank or PSP must also monitor the completeness and accuracy of the information they have on the sender and the receiver of a payment instruction and they are obligated to reject or suspend payments, if necessary.

The PSP must then screen both the payer and the beneficiary against the relevant set of sanctions lists. In the case of a sanctions match, they must block the payment or freeze the account and report it to the relevant authority.

Similarly, screening is required for any transaction conducted with a payment instrument that can be used for person-to-person (P2P) transfers. Although it is not necessary to screen credit card transactions in this way, transactions through alternative payment providers (such as e-wallets) must be screened according to their risk profile.

Today, traditional screening solutions are not able to process such a huge influx of records quickly enough, creating a queue that the system has to work through, slowing down the customer experience. Additionally, systems are typically architected according to standard business throughput, and do not have the flexibility to adjust automatically to the increased activity.

The good news? Technology will deliver the much needed holiday cheer.

Deck the halls

Banks and PSPs want to facilitate instant screening, enabling them to go fast whenever customer and transaction volumes surge.

By accelerating the throughput of records so they are able to screen in real time (while increasing the accuracy of matches), banks and PSPs will be able to prevent the backlogs they currently have to deal with at peak times. This will enable them to meet the expectations of their customers and provide a fast and frictionless experience.

Additionally, payment service providers should consider implementing a new flexible architecture to enable them to scale their screening solution up and down, based on demand. Utilising cloud technology and internet scaling techniques could enable screening systems to expand and contract with elasticity, providing greater flexibility to handle varying volumes. This approach would not require permanent changes to the infrastructure and could reduce the total cost of ownership of the solution.

All is merry and bright

The Black Friday and Cyber Monday trend is not showing any signs of slowing down… and neither are those who could be engaged in illicit financial activity, linked to sanctioned entities, or susceptible to bribery and corruption.

Even at this time of year, those banks and PSPs with the proper payments and customer screening processes will need to know who’s been naughty and who’s been nice – just like Santa.