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What is Sanction Screening?

Financial services firms need to perform sanctions screening to comply with regulatory requirements and avoid legal, financial, and reputational risks associated with dealing with sanctioned parties or high-risk activities.

Sanctions screening involves checking the identities of customers, counterparties, vendors, and transactions against various sanctions lists and watchlists to prevent or detect any violations. Failing to comply with sanctions regulations can result in severe penalties, fines, legal actions, and reputational damage.

 

What are the various global sanctions lists available?

There are several sanctions databases globally maintained by different governments, international organizations, and private companies. These databases contain information about individuals, entities, and countries that are subject to economic or financial sanctions.

Some of the most well-known sanctions databases include:

 

  • United Nations Security Council Sanctions List: This database contains information about individuals, groups, and entities that are subject to sanctions imposed by the United Nations Security Council.
  • Office of Foreign Assets Control (OFAC) Sanctions List: This database is maintained by the U.S. Department of the Treasury and contains information about individuals, organizations, and countries that are subject to U.S. economic and trade sanctions.
  • European Union Consolidated List: This database contains information about individuals, groups, and entities that are subject to EU sanctions.
  • Her Majesty’s Treasury (HMT) Sanctions List: This database is maintained by the UK government and contains information about individuals, organizations, and countries subject to UK sanctions.
  • Australian Sanctions List: This database contains information about individuals, groups, and entities subject to Australian sanctions.
  • Canada’s Special Economic Measures Act (SEMA) sanctions list: This database contains information about individuals, groups, and entities subject to Canadian sanctions.

Regulators may impose an administrative sanction if they find that an Accountable Institution or person has not complied with the Act or with a directive issued in terms of the Act.

Which companies and industry sectors need to screen for sanctions?

  • Legal Practitioners
  • Trusts and company service providers (TCSPs)
  • Credit Providers
  • High-Value Goods Dealers
  • Estate agents
  • Banks
  • Financial services providers
  • Crypto exchanges
  • Mutual banks and cooperative banks
  • Life insurers
  • Dealers in foreign exchange
  • What challenges do accountable institutions face when screening their relationships with these Sanctions lists?

Financial service firms face several challenges when screening their relationships for sanctions compliance. Some of the challenges include:

  • Large volumes of data: Financial service firms deal with large volumes of data, making it difficult to screen every customer quickly and effectively. This can result in false positives, which can be costly and time-consuming to resolve.
  • Complexity of screening rules: Sanctions screening rules can be complex and often change frequently. This makes it challenging for financial service firms to keep up with the latest sanctions updates and ensure that their screening processes remain compliant.
  • Name Matching algorithms: Using exact matching between your relationship name and the sanctioned name doesn’t take into account spelling, typos, and name variations that can occur between records, potentially enabling the sanctioned person or company to freely conduct business.
  • Lack of standardization: Different sanctions lists have different formats, leading to a lack of standardization. This can make it difficult and costly for accountable firms to ensure that they are consistently screening customers across all jurisdictions.

Overall, sanctions screening can be complex, time-consuming, and costly for financial service firms to do in-house. To address these challenges, many firms are turning to Sanctions Screening Services to automate and streamline their sanctions screening processes.

Discover our Sanctions Screening and Monitoring Services.