Want to know what is sanction checks? It is a crucial compliance process in use at financial institutions and many other businesses to vet customers and partners against international sanctions lists. But what information might be found in one of these routine background checks?
According to Peter Smith, Director of Compliance, “A sanctions screening check can reveal all sorts of vital information that every company should be aware of about the individuals and companies they do business with.”Β
A screening analysis runs across large ranges of public lists sanctioned by governments across the world.Β
It uncovers any form of matches between the names screened or entities and the listed individuals or groups under the restricted lists.
Read on to find out critical types of information that might be revealed in the process of sanctions screening and why keeping an effective screening program is essential to all organizations operating globally.
The Purpose of Screening Checks
The reason for conducting sanction checks and screening is to make sure that your business does not engage in any dealings in a way that could violate sanctions under international trade law.Β
The sanction screening is essential in the estimation of risks from business deals involving individuals or entities blacklisted due to criminal, terrorist, and money laundering activities.Β
An efficient process for sanction screening protects the reputation of your organization and serves to reduce legal exposure.
In 2022, global sanctions surged by 30%, hitting an unprecedented increase due to undesirable geopolitical tensions.
What Gets Screened?
When performing sanction screening, your staff will search various government-issued sanctions lists from all over the world that contain restricted parties.Β
This includes scrutinizing the names of potential customers, suppliers, financial transaction recipients, and other partners against the lists.Β
Standard information screened includes full names, aliases, company names, dates of birth, addresses, and other identifiable details.Β
By casting a wide net in its sanction checks, your organization can have confidence no matched names were missed.
In 2023, over 200 countries and international bodies maintained and updated sanctions lists.Β
Bonus: To learn how we make sanctions list screening simple and cost-effective for businesses of any size, check out our sanctions compliance solutions and screening tools today.
Searching Sanctions Lists
There are different lists of sanctions published by various countries, citing foreign policy objectives, and these get updated regularly.Β
For a comprehensive picture during sanction screening, your compliance team would have to use checklists from the European Union, United Nations, United States, and the United Kingdom, amongst other vital nations, for a global sanction check process.
Red Flags to Watch
While conducting sanctions screening on platforms offering services for sanctions list screening, one has to be on the lookout for any kind of red flag.Β
Some information may raise the probability of triggering a possible alert that may require further research.Β
It can be vague or missing names, multiple addresses, relations with targeted sanction territories, and discrepancies in a person’s result of sanction screening over time.Β
It has vigil on these kinds of red flags that will help financial institutions and other companies using sanction checks to remain clear of possible future issues.
In 2024, the Financial Action Task Force said that 40% of all issues with the sanctions are related to addresses and aliases.
Commonly Seen Screening Results
The most common results in sanctions screening include no match found, potential match for further review, and confirmed match to restricted parties. In any case, the financial firm must have an implemented response.Β
Although avoiding transactions with confirmed matched sanctions is the goal of most organizations’ sanctions screening, there are no simple passes to continue given to potential matches.Β
As such, a finance company should understand the full range of possible outcomes from sanctions list screening.
In 2023, financial institutions reported that 15% of their screenings generated possible hits that demanded further investigation.
Keep Screening Up-to-Date
Companies should provide periodic updates of the sanctions lists and screening services to ensure that the screening applied for sanctions remains effective.Β
Sanctions themselves are changed, and new designations are added regularly, sometimes several times a week.Β
It is essential to have periodic screening for new restrictions so there is accurate information on the list being used with sanctions data.Β
Insufficient monitoring and updating may lead to severe legal non-compliance issues for financial firms in case of a new match, which may be missed due to outdated sanctions data. Continuous monitoring and updating facilitate sanction checks over time.
By the end of 2023, more than 1,500 changes had been included in the global sanctions lists, a sure sign of the dynamism persisting in geopolitical relations.
The Need for Compliance
Compliance with international sanctions is highly vital to any financial institution or business involved in activities across borders.Β
The legal and reputational risks from failing a sanctions screening check are just too enormous to gamble with.Β
Though investment in sanctions screening services and checks is a necessity, non-compliance may attract hefty fines and even sufficient grounds for criminal prosecution in some jurisdictions.
Matching of any type to a sanctions list in today’s transparent world is highly harmful to brand reputation and customer trust.Β
Ensuring ongoing success in foreign markets requires that firms allow sanctions screening and compliance with restrictions to feature in their top priorities.Β
Thorough sanctions list screening checks, regularly, through a reputable provider are a must for operating safely in an ever-more complex regulated environment.
