How Can a Misconduct List Help You in Identity Verification?

At Silt, we place a lot of emphasis on misconduct lists and what a misconduct list is (and yes, we know we can be a bit relentless about it sometimes). But here’s why: we don’t want you facing massive fines or compliance headaches because of avoidable risks. 

According to PwC, 47% of companies worldwide have faced at least one case of identity theft in the last 24 months. Reviewing PEP and sanctions lists is crucial for compliance in identity verification. That’s why today, we want to explain why you need to know about them.

What is a misconduct list?

First things first: we need to explain what a misconduct list is, because without it, this article wouldn’t make much sense. 

Formally, a misconduct list is a record or database that flags individuals or entities for risky or inappropriate behavior. These behaviors might include fraud, financial crimes, or other actions that could harm businesses or compromise compliance processes. Misconduct lists are often used alongside public lists, such as those maintained by the CIA, FBI, or Europol, to help organizations identify potential risks and take preventive action.

But let’s put it more simply. Imagine someone commits fraud within a company’s network. A misconduct list works as a kind of “early warning system,” notifying others in the network about that person’s actions.

As we always say: this isn’t just about reacting to fraud – it’s about proactively preventing it. And that’s why understanding misconduct lists is so important.

How does a misconduct list work?

Well, now that you have understood how important a misconduct list is and how it operates as a powerful tool to identify and flag individuals or entities involved in questionable or harmful activities, here’s a breakdown of how it functions:

➡️ ​Data collection
As we already said, misconduct lists gather information from various sources, such as public databases, regulatory bodies, law enforcement agencies, and even private networks. These sources can include global sanction lists, politically exposed persons (PEP) databases, adverse media reports, and internal company records.

➡️​ Classification
Once the data is collected, it’s categorized based on the type of risk. 

• Sanctioned entities: Organizations or individuals under international restrictions.
• PEPs: Politically exposed persons with potential links to corruption or illicit activities.
• Adverse media cases: People or businesses associated with negative press or controversial incidents.

➡️ Integration into systems
These lists are integrated into compliance tools and platforms used by companies to perform screening processes. Advanced tools often allow seamless integration, enabling businesses to screen clients, partners, or employees in real time.

➡️ ​Risk assessment
When an individual or entity is screened, the system compares their details against the misconduct list. If there’s a match, the system flags the entity and provides details about the associated risk, such as money laundering, fraud, or ties to criminal organizations.

➡️​ Decision-making
Companies then use this information to decide the next steps:

• Should the client or partner be onboarded?
• Is additional due diligence required?
• Should the relationship be terminated to avoid regulatory violations?
  

➡️​ Continuous monitoring
This is really, extremely important: misconduct lists aren’t static; they’re updated regularly as new data becomes available. Continuous monitoring ensures that businesses stay informed about risks even after the initial screening.

Types of misconduct lists

There are various types of watchlists that businesses rely on to identify potential risks and maintain compliance. Each type serves a specific purpose and is tailored to flag different categories of misconduct or risk. Here are the most common types:

🔹​Global watchlists: created by regulatory bodies (UN, EU, OFAC) to flag individuals or entities involved in criminal or high-risk activities, like sanctions or terrorism.

🔹​PEP watchlists: identify politically exposed persons (e.g., government officials) who may pose corruption or bribery risks.

🔹​Adverse media lists: highlight individuals or entities appearing in negative news linked to fraud, crime, or controversies.

🔹​Internal misconduct lists: company-specific lists of individuals flagged for fraud or harmful actions within a network.

🔹​Criminal watchlists: maintained by agencies like the FBI or Interpol to track most-wanted individuals.

🔹​Transaction monitoring lists: focused on detecting suspicious financial activities, aiding AML (Anti-Money Laundering) efforts.

🔹​Sector-specific watchlists: customized lists for risks unique to specific industries like fintech or real estate.

How businesses use misconduct lists to enhance KYC and KYB processes

Let us explain how we and our clients use them to enhance security and efficiency during KYC and KYB process:

1. Spotting risks early
Yep, we’ve said it once or twice already. But we’re never going to stop repeating it. Remember, always remember: a misconduct list is the only thing that help you with flagging potential red flags before it’s too late. At Silt, we integrate global watchlists, PEP databases, and sanction lists directly into our verification tools. This way, you can quickly spot if a potential customer or partner has a history of fraud, money laundering, or other illicit activities.

2. Faster, smarter Compliance
Regulations like AML (Anti-Money Laundering) or FATF guidelines demand constant vigilance, and we know this can be overwhelming. That’s why our tools screen misconduct lists in real-time, automating the process so you can meet compliance requirements without drowning in manual checks.

3. Building trust
We’ve learned that trust is everything in business. And misconduct lists help you onboard clients and partners with confidence. You’ll know that the people you’re working with don’t pose hidden risks to your reputation or operations.

4. Continuous monitoring
Here’s the thing: risk doesn’t stop after the initial screening (again). That’s why we make sure our clients can monitor their users over time, catching new red flags as misconduct lists get updated. This ongoing vigilance helps you stay ahead of potential problems.

5. Simplifying complex processes
At Silt, we pride ourselves on making the complex simple (no frictions at all). By integrating misconduct lists into your KYC/KYB processes, you get an automated, efficient workflow that saves you time and resources – all while keeping you compliant and secure.

Misconduct benefits in identity verification

And if it’s not clear yet, let us explain it in another way. Here are the key benefits of misconduct lists (the ones that help us do our job so well):

✅​ Fraud prevention: spot risky individuals or businesses before they cause damage.

✅​ Regulatory Compliance: stay aligned with laws like AML and FATF recommendations.

✅​ Trust building: work confidently with clients and partners who’ve passed the checks.

✅​ Efficiency: automate verifications to save time and reduce manual errors.

These lists are essential for safer, faster, and more reliable identity verification.

So, have we convinced you to try our KYB/KYC processes? Just kidding, we’re not here to force you. But we do want to let you know that Silt offers one of the most efficient technologies on the market.

With Silt, you can save 90% of your time by automating everything – from collecting documents to verifying the representatives of your corporate clients. 

Say goodbye to dedicated verification teams and hello to simplicity. Your employees save time, and you get better results, faster. It’s simple.

And let’s not forget about security: our advanced tools ensure compliance, reduce risks, and help protect your business from fraud and fines.

If you have any questions, we’re here to help 😊