Common Challenges in Sanctions Compliance
Managing sanctions risk has never been so complex
Indirect Sanctions Risks
Professional Services Restrictions
Sanctions lists are evolving constantly
The nature of sanctions is becoming more complex
Sanctions aren’t limited to the entities themselves
There are multiple sanctioning bodies with their own sanctions lists
Sanctions screening challenges
The real challenge for many companies is not just to detect customers who are on sanctions lists and prevent them from transacting with the business, but also to avoid disrupting the customer journey for legitimate customers and undermining the efficiency of the company’s operations.
Key challenges include:
Data consolidation and harmonisation
Screening against multiple sanction sources with varying data elements can lead to inconsistent results, missed matches, multiple alerts per entity, and time-consuming efforts in linking data from different sanction sources.
Effective screening requires consolidating profiles across selected sanction lists to ensure comprehensive coverage and reduce the risk of overlooking sanctioned entities. Solutions that can consolidate lists of interest to a business help screen more comprehensively and reduce the risk of overlooking sanctioned entities due to data discrepancies.
Keeping screening systems and policies continuously compliant
The sanctions landscape is dynamic, with regulations frequently updated. This necessitates constant attention to screening systems and policies, regular staff training, and nimble adjustments to compliance processes. Legal firms must swiftly adapt their screening tools and procedures to reflect changes that could affect their clients or ongoing cases, a task that can be resource-intensive.
Screening solutions must be sufficiently configurable to support these ongoing changes and ensure proper continuous monitoring. The ability to quickly update both policies and screening tools in line with new rules is crucial for maintaining effective sanctions compliance.
Under or over screening
If organisations do not screen robustly, there is a danger of ‘false negatives’, where entities subject to sanctions slip through the net. Conversely, over-screening can result in organisations generating high volumes of ‘false positives’, where non-sanctioned entities are flagged as potentially sanctioned. These false positives need time and resource to remediate to confirm they are not sanctioned.
A screening engine must be capable of precision tuning to reflect the company’s risk exposure and screening rules, as well as being able to deal with imprecise or inaccurate data. Machine learning technology can be used to automate the routine elimination of false positives.
Navigating complex ownership rules
Equivalence
Whilst previously commonplace, relying on a third party for sanctions compliance or ‘equivalence’ is no longer acceptable.
Companies are expected to develop their own sanction compliance programs and conduct independent sanction checks.
Divergence
Top tips for effective sanctions screening
Tip 1: Prepare your customer data well
It’s critical that customer data is up-to-date and it’s worth investing time, upfront, to cleanse and prepare data. Incomplete or inaccurate data will result in false positives and when companies are screening millions of customers daily, this can become a real problem.
Where possible, it is prudent to use data enrichment software to append secondary identifiers and improve process efficiency, such as date of birth, address and nationality for individuals, or business address and registration number for companies.
Tip 2: Use proven, reliable technology to support screening
It’s important to ensure that the sanctions screening software you use to support your screening is fit for purpose.
Here are some of the key considerations you should take into account:
Capacity to handle high volumes and to scale for business growth
Your sanctions screening software has to be both stable and scalable, enabling you to screen the volumes of customer and transactions that your business requires.
Does your technology provider have the resource and infrastructure to ensure your screening and onboarding systems are operationally resilient in the long term?
User-friendly with customisable settings
The technology platform should be easy to use and offer configurable risk-based settings, so that you can avoid over-screening and adjust screening criteria to match your organisation’s risk appetite. The platform should also have workflow tools to manage the remediation of sanctions matches in a logical fashion.
Proven functionality and the ability to automate
Having industry-proven functionality and the ability to automate tasks is vital, as this will help ensure the process is effortless and efficient all the way through from the initial loading of files, through to the results.
Tip 3: Screen against high quality and comprehensive sanctions data
To ensure you are identifying sanctions from all relevant bodies, the data you screen your customers against must be comprehensive and up-to-date and, ideally, consolidated all in one place with other watchlist databases such as politically exposed person, enforcement and adverse media lists.
Some businesses rely on search engines to locate such information, but this is inefficient and could leave your organisation exposed to sanctions breaches and reputational risk.
For full confidence in your compliance, your data sources should:
- Have a full audit trail
- Be curated by a global network of experts
- Offer a consolidated view of global sanctions lists
- Optimise sanctions records
- Add and update sanctions lists as soon as possible
