The Ultimate Guide to the Sanctions Screening Process

What Are Sanctions?

Sanctions are a type of economic pressure used by governments and international bodies to protect security interests and international law against aggressive actions or threats to international peace and security. 

Sanctions can be imposed for various reasons, including anti-money laundering (AML) reasons, financial crimes, human rights violations, terrorism, invasion, and proliferation of weapons of mass destruction. 

Sanctions can take many forms but typically involve limiting or banning trade with a country or entity.

Sanctions can significantly impact businesses, especially those that rely heavily on international trade. They can disrupt supply chains and make it difficult—or impossible—to do business with certain countries.

Geopolitical risk is growing in many parts of the world, and the current food crisis is likely to worsen things. Sanctions will become increasingly common to influence behavior and resolve conflicts. 

This article will discuss various sanctions lists and their potential impact on business, examples of sanctions lists, and how to implement an effective sanctions screening process.

What Is a Sanctions List?

The word “sanctions” can have different meanings. In business, sanctions usually refer to economic and regulatory penalties imposed by one country on another for geopolitical reasons.

A sanctions list is a collection of individuals, businesses, and countries subject to economic sanctions. Sanctions lists are maintained by governments and international organizations such as the United Nations (UN) and the European Union (EU).

Economic sanctions are trade restrictions imposed by one country on another. The purpose of economic sanctions is to change the behavior of the target country. For instance, the European Union has banned all oil imports from Russia as punishment for its invasion of Ukraine

There are three main types of economic sanctions:

  • An embargo is a complete ban on trade with a country. It is the most severe type of economic sanction.
  • Trade restrictions are less severe than an embargo, but they still limit the amount or type of trade that can be done with a country.
  • Financial sanctions are measures that limit or prohibit financial transactions with a country. Economic sanctions can include freezing bank accounts, banning investment, and blocking access to the international financial system.

Why Complying with Sanctions Lists Is Important

All businesses are responsible for sanctions screening and ensuring their compliance, and choosing not to do so can be costly. For example, BNP Paribas, France’s largest bank, was fined $9 billion for violating US sanctions against Iran, Sudan, and Cuba.

Complying with sanctions lists is essential because it helps ensure that businesses and legal entities are not inadvertently doing business with entities or individuals sanctioned by the government. 

Screening against sanctions lists is a complex process, but several screening solutions can help automate the process. Exiger’s ScreenIQ offers sanctions screening and adverse media monitoring technology that is proven to make life easier for risk management and compliance teams worldwide.

By complying with global sanctions lists, businesses can help protect themselves from costly fines and reputational damage.

4 Examples of Sanctions Lists

Here are some examples of sanctions lists:

  • HM Treasury Sanctions List. The HM Treasury Sanctions List is a list of individuals, groups, and entities subject to financial sanctions in the United Kingdom. The sanctions target those involved in terrorist activity, proliferating weapons of mass destruction, or violating human rights.
  • EU Consolidated List of Sanctions. The EU Consolidated List of Sanctions is a list of individuals, groups, and entities subject to financial sanctions by the European Union. The sanctions target those involved in terrorist activity, proliferating weapons of mass destruction, or violating human rights.
  • OFAC Sanctions List. The OFAC Sanctions List is a list of individuals, groups, and entities subject to financial sanctions by the US Department of Treasury’s Office of Foreign Assets Control. The sanctions target those involved in terrorist activity, proliferating weapons of mass destruction, or violating human rights.
  • UN Sanctions List. The UN Sanctions List is a list of individuals, groups, and entities subject to financial sanctions by the United Nations Security Council. The sanctions target those involved in terrorist activity, proliferating weapons of mass destruction, or violating human rights.

How to Implement an Effective Sanctions Screening Process

Sanctions constantly evolve, and keeping up with the latest changes can be difficult. Ensuring compliance with sanctions is a complex and critical challenge for organizations. 

Implementing an effective sanctions screening process can help your organization avoid running afoul of sanctions and facing severe penalties.

1. Determine High-risk Operations

Perform due diligence and consider all aspects of your organization’s business when performing a high-risk assessment. 

  • Know your customer and look at your customer data, supply chain, and financial transactions. Screen all parties involved in a transaction, including the payee, the payer, and any third parties. 

Supply Chain Explorer rapidly surfaces, understands, and mitigates critical threats to your entire supplier ecosystem—down to the Nth tier—with just one click. Request free, comprehensive trial today.

  • Check for matches against known sanctions lists and watchlists. You may need to check several different sanctions lists, including the OFAC Specially Designated Nationals and Blocked Person List, the EU Consolidated List of Persons, Groups, and Entities Subject to EU Financial Sanctions, and the UN Consolidated Sanctions List.
  • Perform a transaction screening. Look at the type of transaction, the country or region involved, and the parties involved. For example, transaction monitoring involving Iran or North Korea is considered high risk.
  • Identify potential matches and investigate further. If you find a possible match, you’ll need to dive deeper and determine whether it’s an actual match. This can be done by looking at additional information, such as the date of birth or address.
  • Take action if necessary. If you determine that a transaction does violate sanctions, you’ll need to take appropriate action. This may involve stopping the transaction, notifying the relevant authorities, or taking other steps.

2. Prioritize Data Organization

Regarding sanctions screening, one of the most important things you can do is prioritize data organization. A well-organized screening system for storing and accessing your data will make screening for potential matches against sanctions lists much more effortless.

There are a few different ways to go about organizing your data:

  • Create a central database with various criteria to search. 
  • Maintain separate files for each data type, such as customer names, addresses, and ID numbers. 
  • Make sure you have a transparent system for labeling and storing data. This will make it easier to find specific information when you need it.
  • Keep track of where your data comes from. This will help you determine its accuracy and trustworthiness.
  • Be sure to regularly back up your data. This will protect you in case of a power outage or other technical issues.
  • Identify key sanctions data sources.
  • Detail further critical points to this part of the process.

Whichever method you choose, it’s essential to have a system that can be easily updated and accessed by all members of your screening team.

3. Prioritize Relevant Data Elements

As you develop your screening process and identify screening requirements, it will be essential to prioritize relevant data elements. This will help you focus on the information that is most likely to be associated with sanctioned individuals and entities and ensure that your process is as efficient as possible.

There are a few factors to consider when determining which data elements to prioritize:

  • The type of data you have available. Some data will be more beneficial than others in identifying sanctioned individuals and entities. For example, birthdates and addresses are more helpful than middle names or nicknames.
  • How likely the data is to change. Sanctioned individuals and entities often change their names or contact information to avoid detection. As a result, data that is less likely to change, such as date of birth, is more valuable than data that is more likely to change, such as address.
  • How specific the data is. The more detailed the information is, the easier it will be to match it to records in sanctions lists. For example, a full name is more specific than the last name, and a complete address is more detailed than a city.

Once you have considered these factors, you can prioritize the data elements that are most relevant to your organization, and that will be most effective in identifying sanctioned individuals and entities.

4. Set Up Screening Intervals

While it is essential to have an effective sanctions screening process in place, it is also critical to ensure that screening intervals are set up correctly. Screening intervals should be based on various factors, including the type of sanction being screened for, the country or region involved, and the level of risk associated with the transaction.

When setting up screening intervals, financial institutions should consider the following:

  • The type of sanction being screened for. Sanctions can be divided into two broad categories: primary and secondary. Primary sanctions are imposed by a country or regional body on another country or entity and typically target key industries or sectors. A government or regional body sets secondary sanctions on entities doing business with a country or entity already subject to primary sanctions.
  • The country or region involved. Sanction regimes can vary significantly from one country or region to another. For example, European Union sanctions typically target specific sectors, while US sanctions often target individuals and entities.
  • The level of risk associated with the transaction. Transactions involving high-risk countries or regions or conducted in high-risk industries or sectors may require more frequent screening.

Financial institutions should also remember that sanctions regimes can change rapidly and that new sanctions may be imposed with little or no notice. As a result, it is crucial to have a process in place for reviewing and updating screening intervals on an ongoing basis.

5. Check Compliance Against Relevant Sanctions Lists

As part of an effective sanctions screening process, it is crucial to check financial crime compliance against relevant sanctions lists. This will help ensure that your organization is not doing business with individuals or entities subject to economic sanctions.

Read Exiger’s white paper “Corporations and Sanctions Compliance: Navigating through a Minefield” to learn more.

You may need to check many different sanctions lists, depending on your business and operations. The most common ones are the US Treasury Department’s Office of Foreign Assets Control (OFAC) list, the European Union’s consolidated sanctions list, and the United Nations Security Council sanctions list.

Checking compliance against these lists can be a complex and time-consuming process, so it is vital to have a robust system and employee onboarding to do this effectively.

One way to streamline the process is to use a sanctions screening solution. A sanctions screening software can help you quickly and accurately check compliance against multiple sanctions lists and other critical data sets such as Politically Exposed Persons (PEP) lists.

Sanctions/PEP screening is essential to compliance with economic sanctions and other measures. By checking compliance against relevant sanctions lists, you can help ensure that your organization is not doing business with individuals or entities subject to these measures.

Boost Your Sanctions Screening with Exiger

Sanctions lists can have a significant impact on business. It is vital to ensure your company has an effective sanctions screening process in place to avoid potential penalties and fines. 

Exiger’s screening tools and team of experts can help your business build its sanctions screening capabilities. We offer a range of services, including training, software, and consulting that will help you stay ahead of the curve regarding compliance with sanction regulations. 
Contact us today to learn how we can help you protect your business from the risks associated with doing business with sanctioned entities.

Don’t play guess who. Mitigate your risk today:

For more on Exiger’s Sanctions Response:

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Companies and Sanctions Compliance: Navigating Through a Minefield

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Financial Sanctions Evasion Typologies: Russian Elites And Enablers

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