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Sanctions Screening: A Guide for Financial Institutions
Automated vs. Manual Screening: When is Each Effective?
In today’s ever-evolving sanctions landscape, financial institutions (FIs) must remain vigilant in their efforts to prevent violations. Two approaches to sanctions screening are often discussed: automated and manual screening. While both have their benefits and drawbacks, understanding when each is most effective can help FIs optimize their compliance strategies.
Automated Screening
Automated screening involves using technology to scan transactional records against a database of sanctioned entities. This approach is particularly effective when the reference data is readily available in an electronic format or can be easily sourced from a reliable source. Automated screening also allows for frequent and rapid screening, which is critical in today’s fast-paced financial environment.
Manual Screening
On the other hand, manual screening involves manually inputting names into an online filter or reviewing transactions by hand. While this approach may seem less efficient than automated screening, it can still be effective in certain situations. For example, if an FI has identified only a small number of names requiring screening, investing in an automated system may not be justified. In such cases, manual inputting of names into an online filter may be the most practical solution.
Screening Frequency and Timing
In addition to the type of screening used, frequency and timing are also critical factors to consider. As a general principle, screening should occur at regular intervals, either upon trigger events or when customer information changes. The frequency of screening will depend on the risk level of each transaction, with high-risk transactions requiring more frequent screening.
- For example, FIs subject to multiple jurisdictions’ regulatory requirements may need to screen transactions more frequently to ensure compliance with each jurisdiction’s sanctions and know-your-customer (KYC) regulations.
Transaction Screening: What Data Elements Matter?
When it comes to transactional records, several data elements are critical for effective screening. These include:
- Parties involved in the transaction, including remitters and beneficiaries
- Agents, intermediaries, and FIs
- Vessels, including International Maritime Organization (IMO) numbers
- Bank names, Bank Identifier Codes (BIC), and other routing codes
- Free text fields, such as payment reference information or stated purpose of the payment
- International Securities Identification Numbers (ISINs) or other risk-relevant product identifiers
Manner, Timing, and Frequency: Key Considerations
When performing transaction screening, it is essential to consider the manner, timing, and frequency of screening. The goal is to stop a potential violation before it occurs, typically at a point in time where relevant information cannot be changed or removed.
Stay Ahead of the Curve: Staying Compliant in an Evolving Sanctions Landscape
Sanctions compliance is a dynamic process that requires ongoing monitoring and adaptation to changing circumstances. By staying informed about best practices and regulatory updates, FIs can remain vigilant and proactive in preventing sanctions violations.
For more information on payment transparency standards, visit [link]. For further guidance on sectoral sanctions identifiers, refer to the glossary, page 14.