Requirements of Accurate Sanctions List Checks

In a world where financial crimes are gaining momentum, traditional sanction screening is not sufficient to meet the regulatory requirements. Many businesses are not aware of the consequences it yields to work in close collaboration with entities that are sanctioned. Under recent circumstances of global tension hinting towards WWIII, the chances of big changes in the sanctions landscape are really high. 

Apart from growing complexity, higher concealed risks making their way into the business landscape, it is becoming more and more difficult to prepare yourself for the changing dynamics across the globe.

This blog will talk about the core purpose of sanctions list checks, prerequisites to ensure accurate sanction checks, and ultimate implications it can have on the business. 

What is the purpose of sanction lists and resulting checks?

While many people believe sanctions to be some type of restriction that can instantly alter the behavior, this is not the right way to perceive sanctions. Rather sanctions mainly refer to implementing and developing such circumstances that hamper the countries or sanctioned entities from continuing their usual pattern of dealing with other potential clients.

Having that said, we can define sanction lists as the official record with names of individuals, entities, and countries subject to restrictions or prohibitions due to involvement in illicit activities or posing a threat to national security. 

While sanctions list screening and watchlists are different types of records, the core purpose converges at a mutual goal of preventing financial crimes such as money laundering, terrorist financing, and proliferation financing.

Does your business need sanction list checks in 2024? 

Even though the world has become highly progressive, the AML controls are still underdeveloped. Considering the smart nature of crimes and huge involvement of technology in both facilitating and detecting crimes, the sanction check lists remains crucial. 

• To abide by legal requirements set by regulatory authorities in order to fight financial crime and avoid hefty fines in case of any gaps detected. 
• To prevent illicit actors from entering the business landscape and resultantly exploiting their client ship to launder money through your business. 
• To ensure compliance in order to build trust and credibility with stakeholders, protecting your business and keeping up with the competitive market. 
• To grow beyond borders, sanctions list screening is essential for navigating international trade and partnerships without getting fooled by concealed crimes. 
• To ensure an additional layer of security in assessing risks,  minimizing the likelihood of exposure to financial risks.

What steps Ensure Accurate Sanctions List Checks? 

While keeping up with the regulatory requirement was already a big enough challenge to deal with, companies all across the globe are also faced with the consistent challenge of dealing with false positives that disrupt the entire purpose of sanction list checks.

Here is a closed strategy to deal with both the regulatory requirement of implementing sanction list checks whilst dealing with false positives. 

1. Authentic Data Sources 

The entire purpose of sanctions compliance goes to waste if these checks are not backed by verified and not credible enough to meet the regulatory requirements. Businesses need to integrate a really extensive sanctions data that may cover all the aspects of screening requirements for them without frustrating their manual resources. 

AML Watcher with a repository of 60,000+ data sources serves as the industry leading, consolidated database meeting sanctions screening  requirements in real time to reduce the business exposure rate due to dynamic changes in risk status. 

2. Real Time Screening 

As the global nature of data is becoming highly dynamic, one cannot rely on data that is years older or even days later. Real-time sanction screening is a high need of the time for detecting minimal yet fast changes in risk status among individuals and businesses. 

By using AML Watcher for their real time sanction screening checks, businesses are immediately notified of any updates or additions to sanctions lists, enabling timely risk mitigation measures.

3. Risk Based Screening

Using a risk-based approach to sanctions list check can help businesses iin identifying and then assessing the level of risk posed by customers to prioritize screening efforts. High-risk entities can be assigned a lower risk tolerance so that compliance teams can detect the changes in risk level as soon as they emerge and resulting enhanced due diligence can be deployed as well. 

4. Ongoing Monitoring  

As the name suggests, keeping a consistent eye out for risk can help not only in detecting the risks, but offer timely insights in devising the dealing strategy to combat risks that may emerge later in the way. 

Regularly or intervally checking for changes in risk status and behavior of the customer can help identify patterns that are being different than usual, thus hinting onwards more in depth screening in this domain. 

What’s the way forward? 

Apart from meeting the regulatory requirements, accuracy in results of sanction screening is a major challenge. Opting for a risk based approach, advanced screening algorithms to sanction list screening not only enhances regulatory compliance but get your desired results, filtering out the false positives and irrelevant results.