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US and UN Sanctions Lists: A Comprehensive Guide for Businesses
The United States Office of Foreign Assets Control (OFAC) and the United Nations Council impose sanctions on individuals, entities, and countries that pose a threat to national security or violate human rights. These sanctions can have severe legal and financial consequences for businesses that fail to comply.
Who Must Comply with Sanctions?
US Citizens and Corporate Entities
US citizens and corporate entities constituted in the US are subject to OFAC’s sanctions lists. Additionally, any entity that trades in US dollars, US goods, or US components, or has a US parent or affiliate must also comply.
UN Nation-States
The UN sanctions list applies to all UN Nation-States, and its regulations are overseen by the UN Council.
Setting Up an Effective Sanctions Screening Process
Every business needs a comprehensive Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) program in place that includes sanctions screening. This process helps mitigate risks associated with sanctioned parties and non-compliance.
Key Steps to Set Up an Effective Sanctions Screening Process
- Determine where the risks lie: Identify which sanctions lists your business needs to prevent or detect during operations. Consider global, national, and local sanctions, as well as organizational products, services, and relationships.
- Clean up and streamline data: Ensure that KYC/Know Your Customer information is accurate, complete, and integrated across systems to avoid false positives and missed detections.
- Determine relevant attributes for screening: Identify which data elements are relevant for screening against specific sanctions risks. Names of individuals/entities with whom the organization has a relationship can be screened against name-based lists, but not geographic lists, for example.
- Sanctions Data/Screening setup: Determine which lists are relevant for screening based on the nature of clients, products offered, and business operations. Ensure that lists are kept up-to-date and enhanced with additional information as needed.
- Screening intervals: Repeat sanctions screening at defined intervals through an automated process, such as when establishing new relationships or upon trigger events like regulatory changes.
Handling Matches
When a match is generated during screening, it’s not necessarily an indication of a sanctions risk. Verify the match using additional information to determine whether it’s true or a false positive. If confirmed, report the match to internal compliance or reporting officers and suspend all transactions.
Challenges in Sanctions Screening
- Evasive behaviors by Politically Exposed Persons (PEPs)
- Multiple sanctions lists requiring consolidation and data corruption risks
- Poor internal data management
- Different writing systems or naming conventions
- Manual data entries during onboarding increasing human error risks
Conclusion
Every business must have a documented and regularly reviewed sanctions screening strategy in place. Accurate and comprehensive internal data is key to an effective sanctions screening process, while technology helps identify financial crime risks accurately and timeously.
To learn more about how to set up an effective sanctions screening process, download our free Ultimate Sanctions Screening Guide or book a free Discovery Call with sanctions.io.