Sanctions Due Diligence Checklist for Financial Institutions

A financial institution can screen a customer against a sanctions list and still miss important risks. A customer may use an alias, own a company through several layers, or become sanctioned after onboarding.

That is why sanctions due diligence needs to go beyond a one-time sanctions check. Financial institutions need a structured process for screening customers, beneficial owners, transactions, and counterparties, investigating potential matches, and keeping records of decisions.

This sanctions due diligence checklist breaks the process into practical steps financial institutions can use to strengthen sanctions screening, AML watchlist checks, and AML sanctions screening.

What Is Sanctions Due Diligence?

Sanctions due diligence is the process of identifying and assessing whether customers, businesses, beneficial owners, counterparties, or transactions may be connected to sanctioned individuals, entities, countries, or activities.

A typical sanctions screening process compares customer or transaction information against relevant sanctions lists and watchlists. A sanctions check may happen during onboarding, before a transaction, when customer information changes, or when a sanctions list is updated.

For financial institutions, effective AML sanctions screening should not stop at matching a customer's name. It should consider aliases, spelling variations, ownership structures, jurisdictions, and other information that can help determine whether a potential match is genuine.

An AML watchlist may include sanctions lists as well as other risk databases used by a financial institution. The exact sources a bank or fintech needs depend on its jurisdictions, customers, products, and regulatory obligations.

For example, a Nigerian bank serving international customers may need to consider relevant Nigerian, UN, US, UK, EU, and other applicable sanctions sources rather than relying on a single list. 

This guide on sanctions screening for African banks provides more context on building a sanctions programme for African financial institutions.