Primary and secondary identifiers to reduce false positives.

A database designed to support effective Customer Due Diligence (CDD) and comply with Anti-Money Laundering (AML) regulations must ensure the precise identification of the entities involved. These entities may include individuals, legal entities, or other relevant categories (such as Politically Exposed Persons, sanctioned organizations, or individuals linked to suspicious activities). Managing this data requires the use of primary and secondary identifiers, which are essential to ensure the system’s accuracy and reliability.

Definition of primary and secondary identifiers

Primary Identifiers

Key attributes that uniquely and unambiguously identify an entity. These include:

• Name and surname, including possible variations (aliases, abbreviations, or transliterations) or full name.
• Date and place of birth, which help distinguish individuals with identical or similar names.
• Unique codes, such as tax ID numbers, passport numbers, or ISIN codes for financial instruments*.

Secondary Identifiers

Additional information that complements primary data and enhances the ability to verify an entity. These include:

• Addresses, such as those related to birth, residence, domicile, or addresses linked to evidence, including historical addresses.
• Contextual details, such as occupation, affiliations, relationships with other entities in the database, and professional connections.
• Photographs, which are vital for confirming identity through biometric data during verification processes.

The role of entity resolution and best practices in SGR databases

At SGR Compliance, data integrity and reliability are the cornerstones of our mission to provide clients with the most accurate and comprehensive information possible. One of our key challenges is consolidating data (either structured and unstructured ones) from various sources, to effectively identify and eliminate duplicates.

Entities—both individuals and organizations—can appear across multiple sources, often with variations in names, addresses, or identifiers. Without a robust deduplication process, clients could receive incomplete or confusing reports.

To address this, SGR employs the concept of Entity Resolution within its database to correlate information from diverse sources and create unique, comprehensive profiles for each entity. This approach drastically reduces duplication and improves data quality by leveraging a broader range of datapoints, enhancing the ability to accurately identify subjects.

For example, more than 80% of Politically Exposed Persons (PEPs) in the database developed by SGR include at least one of the following key data:

• year of birth;
• an identifying photograph;
• a personal ID code or professional background information.

Advantages of a robust identifier framework

1. Data accuracy: Attributes like name, date, and place of birth minimize ambiguities, making checks more efficient.
2. Reduction of false positives: The inclusion of identifiers and contextual information, such as photographs, improves results, particularly in cases of high name similarity.
3. Financial traceability: Specific identifiers, like ISIN codes, simplify tracking financial instruments tied to suspicious entities.
4. Regulatory compliance: Databases designed to rigorous standards, such as the one by SGR, support compliance with international AML/CFT regulations.

The combination of primary identifiers (e.g., name, date of birth, unique codes) and secondary identifiers (e.g., photos, contextual details) enriches the database, ensuring its effectiveness and security in AML operations. The Entity Resolution approach adopted by SGR guarantees complete profiles, reduces false positives, and enhances operator efficiency, contributing to greater transparency and security in the global financial system.

* * *

* The role of ISIN in Customer Due Diligence

The International Securities Identification Number (ISIN) is a unique identifier for financial instruments and plays a crucial role in asset tracking, helping to prevent illicit activities.

Main Applications:

1. Transaction monitoring: Enables tracking of securities involved in potentially suspicious activities or linked to blacklists and high-risk countries.
2. Screening and restrictions: Verifies whether financial instruments are issued by sanctioned entities, as required by European regulations (MiFID II and AML/CFT).
3. Asset Traceability: Provides precise control to detect suspicious or anomalous transactions over time.