When an individual or a wider institution fails to comply with laws or regulations, penalties (referred to as sanctions) may be imposed on them. This can happen in any jurisdiction, and depending on the nature of the sanction it can impact an individual or institution’s ability to engage in business transactions.
Sanction searches allow organisations to protect themselves from working with persons or institutions who are prohibited from specific activities and transactions. The reasons for their sanctioning can vary wildly, from political issues to financial and economic disputes between different countries.
What are Sanctions?
In order to stop people and/or institutions from engaging in certain industries, sanctions are imposed. They are often meted out in the wake of the involved parties engaging in, or being suspected of engaging in, illegal activities. Both government entities and certain financial institutions have the authority to issue a sanctions list.
In addition to sanctions, an individual in a prominent public position – such as a law enforcement official or a senior government member – may be more vulnerable to criminal influence like corruption and bribery. In these instances, they are referred to as politically exposed persons (PEPs).
By searching a PEP or sanctions list, organisations can ensure that the people and/or institutions they intend to transact with are not a money laundering risk. That’s why these searches are a key part of any anti money laundering (AML) screening process.
What is a Sanctions List Search?
When a financial sanction is enacted, it applies to all types of transactions and there is no minimum financial limit. These financial sanctions are designed to stop organisations from putting themselves at risk by transacting with a sanction-listed individual or institution.
With a sanction search tool, organisations can check against publications across the region – e.g. the United Kingdom or the European Union – to find PEPs, high-risk individuals and other sanctioned persons who are listed.
Depending on the platform you use for your sanctions screening, this is an easy way to reduce the time and effort required to perform detailed sanctions checks against listed targets.
What are Financial Sanctions?
Ultimately, financial sanctions are a way to prohibit organisations from transacting with sanctioned individuals and institutions. With no minimum monetary limit and applying to all transactions, financial sanctions are the strongest possible restriction that can be imposed. However, it is up to organisations to perform searches against the relevant sanctions lists in their chosen jurisdictions – doing so will help identify foreign financial institutions subject to sanctions, as well as potential clients not on government lists.
When financial sanctions are put in place by either a government or multilateral organisation, they are designed to apply to most – if not all – companies and sectors, even if the business is not regulated by the Office of Foreign Assets Control (OFAC). An OFAC sanctions search and OFAC screening process can therefore support a more robust control system to help reduce the risk of an organisation breaching financial sanctions. Without carrying out the proper checks, institutions may fail to comply with these rules and end up incurring sizable fines – or worse.
What is an International Sanction List?
International sanction lists are a consolidated list of individuals and institutions who have been sanctioned by different authorities around the world, including but not limited to the United States, European Union, United Kingdom, Dutch Authority for the Financial Markets and the United Nations.
When a sanction search is conducted, an organisation will be able to see whether a prospective employee or potential business partner appears on a jurisdiction’s sanctions list of convicted persons and/or institutions. This information is collected from daily publications produced by a variety of financial and regulatory authorities from around the world. Additional consultation is also provided by major anti-corruption organisations such as Interpol and the FBI.
What are the Benefits of Using a Sanctions List Checker?
Searching for potentially compromised individuals and institutions via a sanctions list checker allows organisations to screen potential employees and business partners against up-to-date sanctions lists on an ongoing basis. The ultimate goal of using this tool is that your organisation is protected and you won’t be in breach. Here are some of the biggest benefits:
- Time-saving: Less time spent screening targets through traditional processes.
- Easy to use: Sanctions search platforms are user-friendly and don’t require complex configuration.
- Cost effective: By using a single platform, your overall screening costs are reduced and dependent only on your usage.
- Protected data: Sensitive client data is stored securely to ensure the protection of your information. Know your customer (KYC) policies and procedures should also be followed here.
What are the Risks of Failing to Screen for Sanctions?
For organisations that fail to screen for sanctioned individuals and institutions when conducting AML checks, they run the risk of transacting with listed people and/or organisations who have engaged in – or are suspected to have engaged in – criminal financial activities. Depending on your jurisdiction, if you are found to be transacting with someone on a sanctions list then you may be liable to pay a significant fine, or worse, face a prison sentence.
Nexis Diligence combines all the most valuable intelligence and checks you need in a single solution, allowing you to conduct consistent due diligence and sanctions searches to ensure your organisation is protected against potential threats.