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The Importance of Sanctions Screening for Businesses

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Sanctions screening is a critical component of any business’s compliance strategy. It helps mitigate the risk of being non-compliant with anti-money laundering regulations, which can result in severe financial penalties and reputational damage.

Why Sanctions Screening Matters

• Sanctions screening is essential to prevent businesses from inadvertently dealing with sanctioned entities.
• Inaccurate or incomplete Know Your Customer (KYC) information can lead to false positives during the screening process.

Compiling and Cleaning KYC Information

Companies need to compile and clean their KYC information to ensure that it is accurate, complete, and up-to-date. This includes:

• Gathering relevant customer data from various sources.
• Validating and verifying the accuracy of this data.

Mapping and Integrating Data Sources

Data sources may be distributed across different IT systems, making it essential to map and identify them to obtain a holistic view of the customer base.

Determining Relevant Attributes for Screening

Relevant attributes for screening should be determined based on:

• The nature of clients.
• Products offered.
• Business operations.

Implementing an Effective Screening Strategy

Sanctions data/screening setup involves determining which lists are relevant for screening, keeping lists up-to-date, enhancing data with additional information, and defining the geographic scope of the list.

Challenges During Sanctions Screening

Despite its importance, sanctions screening can be challenging due to:

• Evasive behaviors of Politically Exposed Persons (PEPs) and individuals related to PEPs.
• Multiple sanctions lists may be required for screening, posing consolidation and data corruption risks.
• Poor internal data management can lead to failure to complete, verify or maintain information about shareholders, beneficial owners, suppliers, or other relationships.
• Different writing systems or naming conventions can make screening more challenging.
• Manual data entries during onboarding increase the risk of human error during data capture.

Conclusion

Every business must have a sanctions screening strategy in place that is documented and reviewed regularly. The accuracy and depth of internal data are key to an effective sanctions screening process, and technology plays an important role in identifying financial crime risks accurately and timeously.