Unprecedented global sanctions squeeze screening operations

As the crisis in Eastern Europe unfolds, we consider the impact of global sanctions policy on screening operations.


Effective sanctions screening is more important than ever

Since the beginning of the current conflict in Ukraine, there have been unprecedented global sanctions imposed on Russia by countries across the world, including the UK. Updates are being issued on an almost hourly basis, making it more important than ever for regulated firms to monitor changes both closely and regularly.

The pace of change is likely to continue for some time to come too, as Western governments further ratchet up sanctions imposed on individuals and institutions. To date, the focus has been on banks and key financial institutions, other strategic sectors, and on wealthy individuals. Other sanctions are designed to prohibit the export of goods and services to important industries such as electronics, communications and aerospace. As the international community has made clear, these may go even further targeting other economically vital sectors.

The strategy is clear: cut off supply of finance and credit for the sale and purchase of goods and services, freeze assets, prevent the flow of international goods and services and prohibit access to capital markets.

These sanctions and the counter measures being applied by Russians in response, will no doubt test compliance teams to their limit. In practice, institutions will need to double down on sanctions screening activities if they wish to continue functioning globally at the pace their customers demand, whilst also complying with the very latest global sanctions changes.

For this, data quality is key: abbreviations, name variances, dates of birth and other data items may not perfectly match the true data associated with a sanctioned entity, resulting in higher volumes of false positives to remediate. Added to which, regulatory requirements stipulate entities majority-owned or controlled by a sanctioned entity are also considered a sanctioned entity, meaning any holes in the screening data, particularly around ownership represents a potential breach.

There’s also the added challenge of two U.K. lists – the U.K. sanctions list (FCDO) and the consolidated list (OFSI). Both lists recently underwent enhancements, to which some screening operations may still be adapting, requiring extra care.

Above all, businesses are advised to keep a close brief on the developing situation and to register to receive the latest sanctions alerts from all relevant issuing bodies. It’s imperative to get it right, as businesses failing to carry out diligent sanctions screening could be subject to steep penalties as well as loss of reputation if they inadvertently do business with a sanctioned organisation.

As ever, at LexisNexis® Risk Solutions we’re here to help if clients have any concerns or difficulties with their sanction screening operations.

We wish you all well during these unprecedented times and pray for swift end to this crisis.

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