Sanctions Reporting and Screening Requirements

Introduction

In an effort to prevent the proliferation of weapons of mass destruction, the United Nations Security Council (UNSC) has imposed sanctions on certain individuals and countries. As a result, financial institutions are required to maintain updated lists of designated entities and conduct regular screening of their customers.

Reporting Obligations

Maintaining a Sanctions Database

According to new regulations, reporting persons and entities holding funds or assets for others must maintain a sanctions database that includes the latest information from the UNSC list. This database must be updated within 24 hours of any changes made by the UNSC or its relevant Sanctions Committee.

The database should be comprehensive and easily accessible to employees at all levels, including head office, branch, subsidiary, and outsourced service providers or agents.
Reporting persons are encouraged to monitor and consolidate other countries’ unilateral sanctions lists in their database.

Sanctions Screening

Conducting Regular Screenings

Financial institutions must conduct regular sanctions screening of existing, potential, or new customers against the UNSC list as part of the customer due diligence (CDD) process and ongoing due diligence. The screening should be conducted immediately upon designation, without delay, and within 24 hours from the time a designation is made.

In the insurance sector, screening shall be conducted upon establishing business relationships, during the in-force period of the policy, and before any payout.
Name searches based on possible variations, versions, or arrangements for each designated person should be conducted to prevent unintended omissions.

Dealing with False Positives

Verifying Potential Matches

Reporting persons are required to ascertain potential matches with the UNSC list are true matches to eliminate false positives. This may involve making further inquiries for additional information and identification documents from customers, counter-parties, or credible sources.

In cases of similar or common names, reporting persons should direct any query to the Financial Intelligence Unit or the Regulator to ascertain whether or not the customer is a designated party.

Conducting Due Diligence

Reporting persons must conduct due diligence on related parties, examining and analyzing past transactions of designated parties and related parties. Records of this analysis must be maintained.

In ascertaining ownership or control by a designated party, reference should be made to the definition of “beneficial owner” in anti-money laundering (AML) laws or regulations and requirements for customer due diligence on beneficial owners.

Freezing, Blocking, and Rejecting

Taking Immediate Action

Upon determination and confirmation that a customer’s identity is that of a designated party and/or related party, reporting persons must freeze the customer’s funds, other financial assets, and economic resources, or block transactions (where applicable), to prevent dissipation. This action must be taken immediately and without delay, within 24 hours from the time a designation is made.

By implementing these measures, financial institutions can help prevent the misuse of their services for proliferation financing and support global efforts to combat weapons of mass destruction.