Sanctions Screening: A Comprehensive Guide for Businesses
Introduction
In an effort to combat financial crimes, the United States Office of Foreign Assets Control (OFAC) and the United Nations Council have implemented sanctions lists that apply to all US citizens and corporate entities, as well as any entity that trades in US dollars, US goods, or US components or has a US parent or affiliate. In this article, we will explore the importance of sanctions screening for businesses and provide guidance on setting up an effective process.
Understanding Sanctions Lists
US Sanctions List Applies to All US Citizens and Corporate Entities
The OFAC sanctions list applies to all US citizens and corporate entities, as well as any entity that trades in US dollars, US goods, or US components or has a US parent or affiliate. The list is designed to combat financial crimes and prevent the transfer of funds to individuals or organizations involved in terrorist activities.
UN Sanctions List Applies to All UN Nation-States
The United Nations Council has established its own sanctions list, which applies to all UN nation-states. The list is designed to prevent and suppress terrorism, as well as to address other serious threats to international peace and security.
Setting Up an Effective Sanctions Screening Process
To mitigate the risks associated with sanctioned parties and non-compliance, every business needs a comprehensive Anti-Money Laundering (AML) / Financial Crime Compliance (FCC) program in place that includes sanctions screening. Here are some steps to follow:
- Determine where the risks lie: Identify which sanctions risks your business needs to prevent or detect during its operations.
- Clean up and streamline data: Compile and clean your Know Your Customer (KYC) information to avoid producing false positives and ensure that you can detect sanctioned entities during the screening process.
- Determining relevant attributes for screening: Not all data elements may be relevant for screening. Determine which lists are relevant for screening based on the nature of your clients, products, and business.
- Sanctions Data/Screening setup: Keep lists up to date, enhance with additional information, and consider implementing a list management system to reduce false positives.
- Screening intervals: Repeat sanctions screening at defined intervals through an automated process as determined by internal policies.
Handling Matches
When an alert is generated during screening, indicating a match between a customer or business partner and a sanctions list, it’s important to verify the match using additional information. If confirmed, report the match to your internal compliance officer and suspend all transactions.
General Challenges
Sanctions screening comes with unique challenges and limitations, including:
- Evasive behaviors of Politically Exposed Persons (PEPs) or persons related to 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 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, while technology remains important for identifying financial crime risks accurately and timeously.
How sanctions.io Can Help
sanctions.io offers a highly reliable and cost-effective solution for AML and sanctions screening. Our AI-powered platform with an enterprise-grade API and 99.99% uptime makes it easy to mitigate the risk of being non-compliant. Learn more about how we can help your business by booking a free Discovery Call or taking advantage of our free 7-day trial.