Five steps for effective sanctions screening (Barley Laing)

The war in Ukraine has triggered a proliferation in sanctions against leading politicians, businesspeople and entities in both Russia and Belarus.

It has left many in financial services struggling to keep up with the large number of sanctions announced by the territories they operate in, which they are legally required to adhere to.

Failing to properly assess for sanctions – which is the responsibility of the compliance team – could see financial organisations facing significant fines. Also, they are likely to experience considerable brand damage due to the negative publicity associated
with providing services to someone who’s been sanctioned.

There are five steps to ensure effective sanctions compliance:

1)     Obtain sanctions / watchlist data from trusted global sources

The best way to ensure compliance with sanctions is by having access to up-to-date sanctions lists, also called watchlists. For a long time, these have ensured organisations effectively undertake know your customer (KYC) and anti-money laundering (AML) checks
when onboarding customers, as well as when running regular cross-checks against those on their existing databases.

For effective sanctions screening today these lists must be part of an automated tool that collects and synthesises sanctions data, along with politically exposed persons (PEP) and their relatives and close associates (RCAs) data. This data must be collected
from a wide range of trusted sources worldwide, such as governments, regulators, and credit agencies. Furthermore, the sanctions list used should be able to continually scan for updates and deliver them in real-time. This way it’s possible to provide a smooth
user experience for those opening new accounts or purchasing financial products, which is something many expect in the digital age. This automation of sanctions checks is a much more efficient and accurate method compared with undertaking a manual approach,
which is more expensive due to the additional costs of employing and training staff for this purpose. Also, physical checks increase the likelihood of mistakes being made, which could leave your business exposed to sanctions breaches and the associated cost
in fines and to your reputation.

2)     Undertake adverse media checks

Monitoring the latest news and alerts in real-time is essential, not only to source information on those facing sanctions, but also on PEPs and anyone else who could have potential negative regulatory, financial, or reputational consequences to your organisation.
It’s critical that the tools used to undertake adverse media checks can scan the global news media, sourcing information on those with new sanctions against them, and where legal cases are pending.

3)     Sanctions training for compliance staff

Do compliance staff have a clear understanding of the latest sanctions measures and know how to handle those individuals that are impacted by them? With compliance staff on the front line when it comes to acting on the sanctions data, appropriate training
and guidance must be provided.

4)     Update systems and controls – onboarding and payment screening technology able to act on those sanctioned?

Along with training staff on how to react to customers who have been sanctioned, can your organisation’s onboarding and payment screening platforms effectively do the same? Once those sanctioned have been detected in your database, do you have the systems
in place to quickly block accounts, transactions and freeze funds? It’s critical to have processes in place to instantly act on this information.

5)     Undertake a broader approach with automated identity verification

An automated tool that in real-time sources those on disparate sanctions lists, including PEPs and RCAs, works well as part of a more comprehensive approach to automated KYC and AML operations. It’s why there’s growing interest in using electronic identity
verification (eIDV) tools, which as well as having access to comprehensive sanctions data, PEPs and RCAs, are able to cross-check user-provided details against reputable data streams to ensure they are who they say they are in real-time.

By taking these five steps financial organisations will have access to continually updated real-time sanctions data, including data on PEPs and RCAs, from governments and regulators worldwide. With automated functionality, these lists can be easily used
in conjunction with comprehensive automated eIDV technology, for example, for an accurate, quick, and cost-effective KYC and AML process.