Sanctions Screening 101



Sanctions Screening 101

A beginner’s guide to screening for sanctions as part of an effective AML strategy.

What is a sanction?

A sanction is a preventative measure implemented by a government or an international body to protect national security interests, international law or to defend against threats to international peace and security.

Sanctions are designed to counter individuals and entities confirmed or suspected to be involved in criminal activities such as:

  • Terrorism and Terrorist financing
  • Drug trafficking
  • Human rights violations
  • Weapons proliferation
  • Violation of international treaties
  • Money laundering activities

What is a sanctions list?

A sanctions list is a compilation of political and economic restrictions to be applied to entire countries as well as against individual persons and entities.

Who imposes sanctions?

Below is a list of chief sanctioning bodies for the United States, Britain, the European Union and the UN. Please note that your AML policy will also need to include other sanctioning bodies depending on the jurisdictions your business operates in and the currencies in use.

  • United States The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury
  • United Kingdom Office for Financial Sanctions Implementation (OFSI)
  • European Union European Union External Actions Service (EEAS)
  • The UN The United Nations Security Council

What is sanctions screening?

Sanctions screening is the process of screening individuals or entities against sanction lists. It can be as simple as manually inputting each individual customer name into a search tool or automatically screening customer databases en masse.

Why screen for sanctions?

Diligent sanctions screening is integral to the fight against money laundering and terrorism around the world. Sanctions breaches constitute serious offenses and can result in heavy penalty fines. You may want to check out this article for the most recent examples of AML penalties across the globe.

The challenges are associated with sanctions screening:

Sanctions lists are ever-evolving
New entries are being added to sanctions list all the time, turning the manual database update process into a game of whack-a-mole. Things can get particularly tricky if your AML/KYC process only allows for upon-entry screening and makes no provisions for ongoing protection.

Multiple sanctioning bodies
There’s a multitude of sanctioning bodies in the world, each publishing their own sanctions lists, which don’t always align. Furthermore, the lists can be in various languages or containing different spelling variants of names that are already on other lists.

Poor data quality
The quality of data is a problem that can and does arise both on the side of the sanctions data provider and as part of your KYC. In order for a true match to occur during screening, both data sets have to be adequate, i.e. containing secondary identifiers, such as date of birth, address and nationality of the investigated person. Unless these conditions are met, one can end up with either false positive or false negative results.

What are the sanctions screening best practices?

Continuous data uptake and refresh
Legacy screening systems require constant manual database updates. It’s an inefficient and costly way of doing things. Instead, stick with the screening solutions that use open sources and aggregate data continuously and automatically. A continuous uptake and refresh of sanctions data significantly reduces your chances of incurring false negatives.

Multilingual search
As previously discussed, successful screening can not be limited to sanctions lists in the English language alone. That’s why a multilingual search engine is essential. The best option is an engine that also considers all possible spelling variants, which can be achieved through employing an AI model.

Smooth integration and scaling
When choosing a screening provider, make sure to go with the one that can easily integrate into your existing software infrastructure. Chances are, as your clientele grows you’ll find it cumbersome to go to outside sources for regular checks. That’s why a restful API is ideal. A single time set-up will ensure your AML process will always keep pace with your business.

You’ll find that all of these best practices have been carefully considered and implemented by DataSpike — a simple but powerful AML screening platform. DataSpike harnesses the power of AI and machine-learning technologies to bring you the most reliable results at an unbeatable price.