Financial Institutions Required to Report Suspicious Transactions and Maintain Sanctions List

Introduction

In an effort to curb the proliferation of weapons of mass destruction, financial institutions are now required to report suspicious transactions and maintain a sanctions list. This new requirement aims to prevent the financing of such activities.

Reporting Suspicious Transactions

Financial institutions are expected to submit a suspicious transaction report upon determination of any positive match or suspicion that an account or transaction is related to or linked to a designated entity or party. Additionally, a report should be submitted on any attempted transactions undertaken by a designated party or related party.

• The sanctions list maintained by the United Nations Security Council (UNSC) includes names and particulars of persons designated as prohibited end-users and restricted end-users in relation to the prevention of proliferation of weapons of mass destruction.
• Financial institutions are required to keep this list updated and ensure that it is comprehensive and easily accessible to their employees.

Conducting Sanctions Screening

In conducting sanctions screening, financial institutions should:

• Search for matches against the UNSC List and other countries’ unilateral sanctions lists.
• Conduct due diligence on customers and related parties, including:
  • Examination of past transactions.
  • Analysis of ownership and control structures.

Freezing or Blocking Transactions

Financial institutions are required to freeze or block transactions involving designated parties and related parties immediately upon determination and confirmation of their identity as such.

Key Takeaways

• Financial institutions must report suspicious transactions involving designated entities or parties.
• The sanctions list maintained by the UNSC includes names and particulars of prohibited end-users and restricted end-users.
• Financial institutions must keep the sanctions list updated and ensure it is comprehensive and easily accessible.
• Sanctions screening should be conducted against the UNSC List and other countries’ unilateral sanctions lists.
• Due diligence on customers and related parties, including examination of past transactions and analysis of ownership and control structures, is required.
• Transactions involving designated parties and related parties must be frozen or blocked immediately upon determination and confirmation of their identity.

Conclusion

By complying with these requirements, financial institutions can play a vital role in preventing the financing of proliferation activities and promoting global security. Failure to comply may result in severe penalties.