Automated Sanctions Screening Essential for Effective Risk Management

In today’s financial landscape, implementing robust automated sanctions screening processes is crucial to minimizing the risk of sanctions violations and ensuring compliance with regulatory requirements. According to the Wolfsberg Group’s new guidance, manual screening can only be considered when the risk is low and reference data cannot be sourced reliably.

Reference Data Screening

The importance of clearly defining when reference data screening takes place cannot be overstated. As a general principle, screening should occur:

• When establishing a new relationship to ensure its permissibility
• At regular intervals to validate that the relationship remains permissible
• Periodically, daily in situations where internal or external data sets change frequently

Transaction Screening

Transaction screening refers to the process of screening movements of value within an FI’s records, including:

• Funds
• Goods
• Assets
• Between parties or accounts
• Payments and trade transactions

Identifying Relevant Data Elements

To determine the scope of transactional screening relevant for sanctions risk management, FIs should focus on those transactional records necessary to the movement of value between parties and at a point where detection of a sanctions risk is actionable. Higher sanction risks factors include:

• Cross-border transactions
• Currency used
• Routing of the transaction

Data Elements within Transactions

An FI should initially assess which transaction types are relevant for sanctions screening and identify which attributes within those records are relevant for sanctions screening, including:

• Names of parties involved in the transaction (for list-based sanctions programs)
• Addresses (more relevant to geographically based sanctions programs)

Manner, Timing, and Frequency

Transaction screening should be performed at a point in time where a transaction can be stopped before a potential violation occurs. This typically occurs at various points in the lifecycle of a transaction, but certainly 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, modified, or removed to undermine screening controls

Conclusion

In conclusion, automated sanctions screening is essential for effective risk management and compliance with regulatory requirements. FIs must implement robust processes to identify and mitigate sanctions risks, including reference data screening and transaction screening. By following these guidelines, FIs can minimize the risk of sanctions violations and ensure a safe and compliant environment for their operations.