A watchlist is a specialized database maintained by regulatory authorities, law enforcement agencies or international bodies that contains the names of individuals and entities suspected of involvement in illegal activities or financial crime. These may include, but are not limited to, suspected money launderers, human traffickers, arms dealers, drug traffickers, terrorists, fraudsters, scammers and politically exposed persons (PEPs).

In the context of Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance, watchlists are essential tools used during the customer screening process to identify high-risk individuals or organizations. When a person or entity appears on a watchlist, it triggers the need for Enhanced Due Diligence (EDD), closer monitoring and potentially reporting to the relevant financial intelligence unit (FIU).

Unlike sanctions lists - which are formal restrictions issued by governments or international bodies to enforce foreign policy or national security objectives, watchlists are primarily used for risk detection and prevention. Being on a watchlist does not always carry legal prohibitions, but it does indicate an elevated risk that must be addressed through proper compliance measures.

Ongoing screening against global watchlists is a critical part of any risk-based approach to financial crime prevention. Financial institutions and regulated entities use watchlist screening to stay compliant with international AML regulations, avoid regulatory penalties and protect their businesses from reputational and operational risks.