Earlier this year, the US Federal Reserve Board fined Wells Fargo & Co, of San Francisco, California, a whopping sum of $67.8 million. At the top of its reasons was the firm’s oversight of sanctions compliance risks. 

In the same vein, Microsoft Corporation got its fair share of penalties for its apparent violation of U.S. export controls and sanction laws, as the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) slammed Microsoft with a $3.3 million fine. 

Conducting a sanction list check is a sure way to help an organization stay out of trouble with the law. Therefore, it is necessary for business personnel to know how to perform effective sanction list checks. 

In this article, we will equip you with the knowledge and tools needed to streamline your compliance processes and make sanction list checks an integral part of your operations.
 

What is a Sanctions List?

A sanctions list, also known as a blacklist or a restricted entities list, is a compilation of individuals, organizations, or countries that are subject to economic, trade, or financial restrictions imposed by governments, international organizations, or regulatory bodies. These lists serve as a tool to enforce compliance with various legal and political objectives.

The goal of the sanctions list is to combat terrorism, prevent money laundering, address human rights abuses, or maintain international security. Sanctions lists typically include individuals involved in criminal activities, terrorist organizations, politically exposed persons (PEPs) with a high risk of corruption, entities engaged in prohibited trade activities, or countries subject to economic embargoes. 

The lists can be issued at national, regional, or international levels and are regularly updated to reflect new designations, changes in circumstances, or emerging threats.

Why Do You Need to Conduct a Sanctions List Check?

A sanction list check, also known as a sanctions screening or watchlist screening, is the process of verifying whether individuals, organizations, or countries involved in a transaction or business relationship appear on any government or international sanction lists. 

Conducting a sanction list check involves comparing the names, aliases, and other identifying information of customers, suppliers, business partners, or any other relevant parties against the entries on the sanction lists. The purpose is to identify and flag any potential matches or hits that require further investigation or due diligence.

Conducting a sanctions list check is essential for several reasons. Some include:

1. Legal Compliance: 

Compliance with sanction lists is a legal requirement in many jurisdictions, and failure to comply can result in significant penalties and legal consequences. By conducting sanction list checks, organizations can ensure that they are not engaging with individuals, organizations, or countries that are subject to these restrictions.
 

2. Preserving Reputation: 

A company's reputation is its most valuable asset. Being associated with sanctioned individuals or entities can seriously damage a company's brand, erode customer trust, and deter potential business partners. Business owners must know how to perform effective sanctions list checks so that they can demonstrate their commitment to responsible business practices and maintain a strong ethical standing in the eyes of stakeholders.
 

3. Maintaining International Relationships: 

In today's interconnected global economy, organizations often engage in cross-border transactions and collaborations. Knowing how to perform effective sanctions list checks brings an organization to par with international norms and regulations, fostering trust and credibility with international partners. It helps maintain healthy relationships and enables organizations to participate in global trade with confidence.
 

4. Avoiding Financial Consequences: 

Non-compliance with sanctions can result in severe financial consequences, including hefty fines, asset freezes, and loss of business opportunities. According to a survey conducted by Accuity, almost $1.3 billion worth of fines were issued by OFAC for breaches to U.S. Sanctions in 2019 

Additionally, some jurisdictions may impose criminal liability on individuals or organizations involved in transactions with sanctioned entities. By performing effective sanction list checks, businesses can prevent these financial repercussions and protect their bottom line.
 

Recommended: Regulatory Compliance Requirements and their Importance

How to Perform Effective Sanctions List Checks

Performing effective sanction list checks is crucial for organizations to maintain regulatory compliance and mitigate the risk of engaging in prohibited transactions. 

Here are some key steps to help you perform effective sanction list checks:

a. Understand the Regulatory Landscape: 

Familiarize yourself with the relevant sanctions regulations and laws applicable to your industry and jurisdiction. Understand the specific sanction lists maintained by government agencies, such as the Office of Foreign Assets Control (OFAC) in the United States, the European Union's Consolidated List, or the United Nations Security Council Sanctions Lists. Stay updated on any changes or additions to these lists.
 

b. Utilize Automated Screening Solutions: 

Consider implementing automated sanction screening solutions. These tools can help streamline the process, improve accuracy, and reduce manual effort. Look for software that can scan and compare large volumes of data against multiple sanction lists in real-time. Make sure the solution is customizable and allows for risk-based approaches.
 

b. Access Comprehensive Data Sources: 

Ensure you have access to comprehensive and up-to-date data sources. Relying on a single database may result in incomplete results. Partner with reputable third-party data providers or compliance solutions like Youverify that aggregate information from various sanction lists, including those issued by different jurisdictions and international bodies. This will provide a more holistic view and enhance the effectiveness of your sanction list checks.

The World-Check database by Refinitiv, a global provider of financial market data, aggregates information from over 600 global sanctions, watchlists, and regulatory enforcement lists, covering entities from more than 240 countries. This comprehensive data source provides a holistic view of effective sanction list checks.
 

c. Establish Clear Procedures: 

Develop clear procedures and guidelines for conducting sanction list checks. Define roles and responsibilities within your organization to ensure accountability. Document the steps involved in the screening process, including the use of screening software, the frequency of checks, and the criteria for further investigation or escalation.

Read also: Complete Guide to Sanctions Screening
 

d. Implement Risk-Based Approaches: 

Adopt a risk-based approach to sanction list checks. Assign risk scores to individuals, entities, or countries based on factors such as their geographic location, industry, nature of business, and previous compliance history. Allocate more thorough scrutiny to high-risk entities while applying a lighter touch to low-risk ones. This approach helps focus resources where they are most needed and avoids unnecessary burdens.
 

e. Establish Ongoing Monitoring: 

Compliance is an ongoing process. Establish a system for continuous monitoring of the sanction status of individuals or entities. Automated systems can provide real-time alerts when updates or additions are made to the sanction lists. Regularly review and update your screening processes to keep pace with evolving regulatory requirements.
 

f. Document and Report: 

Maintain thorough documentation of your sanction list checks, including records of the individuals or entities screened, the results of the checks, and any actions taken based on the findings. Implement a reporting system to demonstrate compliance with relevant authorities if required.
 

g. Train and Educate Staff: 

Conduct regular training sessions to educate your employees on how to perform effective sanction list checks and the proper procedures to follow. Ensure they understand the potential consequences of non-compliance and are aware of their role in maintaining effective sanction list checks.

Step by Step Guide on How to Perform Sanction List Checks

Follow the steps below to perform sanction list checks: 

Step 1: Login to your dashboard and navigate to “Sanction & PEP Screening” at the left tab of your screen. Select create workflow builder on the bottom right as seen in the image below. 

Step 2: On the top right corner, select “Check”

Step 3: Provide the individual first name, last name and middle name.

Step 4: Tick the consent button and select check. A detailed report on the individual will be displayed, letting you know his or her sanction status.
 

Automated screening solutions and comprehensive data sources provide the tools needed to efficiently scan and cross-reference vast amounts of data against multiple sanction lists in real-time. These technologies reduce manual effort, improve accuracy, and enhance overall compliance effectiveness.

See how 100+ leading companies use Youverify Workflow Builder for real-time AML screening of individuals and businesses. Request a demo today.