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Sanctions Screening: A Guide for Financial Institutions
As the financial industry continues to evolve, the need for effective sanctions screening has become increasingly important. In this article, we will explore the importance of automated and manual screening processes, as well as the role of transactional data in identifying potential sanctions risks.
Automated vs. Manual Screening
Automated screening processes are highly effective in quickly identifying potential sanctions risks. However, they may not be suitable for all situations. Financial institutions (FIs) with a low volume of transactions or those with access to reliable reference data may choose to forego automated screening and instead opt for manual input.
When to Use Automated Screening
- High-volume transactions
- Access to reliable reference data
When to Use Manual Input
- Low-volume transactions
- Limited access to reference data
Reference Data Screening
Screening reference data is an essential part of the sanctions screening process. FIs should clearly define when reference data screening takes place, typically upon establishing a new relationship and at regular intervals thereafter. The frequency of rescreening will depend on internal or external data set changes, with daily screening recommended for frequently changing data sets.
Frequency of Rescreening
- Daily screening for frequently changing data sets
- Regular intervals (e.g., monthly) for less frequent changes
Transactional Screening
Transactional screening is the process of identifying potential sanctions risks within FI records, including funds, goods, or assets moving between parties or accounts. FIs should focus on transactional records necessary to the movement of value between parties and identify higher risk factors such as cross-border transactions, currency used, and routing information.
Higher Risk Factors
- Cross-border transactions
- Currency used
- Routing information
Data Elements in Transactions
FIs should assess which transaction types are relevant for sanctions screening and identify attributes within those records that are relevant for sanctions screening. Names of parties involved in a transaction are relevant for list-based sanctions programs, while addresses are more relevant to geographic sanctions programs.
Relevant Data Elements
- Party information (names, addresses)
- Agents
- Intermediaries
- Vessels
- Bank names
- Routing codes
- Free text fields
- Product identifiers
Manner, Timing, and Frequency
Transactional screening should be performed at a point in time where a transaction can be stopped before a potential violation occurs. This typically occurs prior to executing any commitment to move funds. Particular attention should be directed to points within the transactional process where relevant information could be changed or removed to undermine screening controls.
Best Practices
- Screen transactions prior to committing to move funds
- Monitor for changes in relevant information during the transactional process
Conclusion
Sanctions screening is a critical component of financial institution risk management. By understanding the importance of automated and manual screening processes, as well as the role of transactional data in identifying potential sanctions risks, FIs can effectively mitigate their exposure to sanctions violations.
Sources:
- Wolfsberg Group Payment Transparency Standard (2017)
- Glossary, page 14