What is a sanctions list?

To ensure that financial sanctions are respected and enforced, financial institutions are required to consult sanctions lists when doing business.

Financial sanctions are an important part of the global fight against financial crime and are used by governments around the world to restrict or prohibit trade with foreign targets who are involved or suspected of being involved in illegal activities. Financial sanctions can be imposed on entire countries or on individuals. They can also be used against parties who are not directly involved in crimes, but who act on behalf of others who do. To help companies determine who is or is not subject to financial sanctions, governments and financial authorities draw up sanctions lists.Since sanctions typically come with severe civil and criminal penalties , institutions should carefully review their compliance status and incorporate their use of sanctions lists into the internal systems and controls they put in place to detect and report financial crimes. .

Given the strict legal implications of breaching sanctions, financial institutions should ensure that they understand what sanctions lists are and how to use them properly. Who is on a sanctions list?

Sanctions may be imposed as a result of illegal activity or to achieve a foreign/diplomatic policy objective. They are normally adopted by an act of government or by an international authority: a resolution of the United Nations Security Council, for example.

Many sanctions lists include targets involved in the criminal financing of terrorist activities. In the United States of America, for example, the Patriot Act prohibits US companies from providing « material support » to suspected terrorist groups, while the UN Security Council committee enforces laws such as the order of Al-Qaida and the Taliban (2006), which has a similar function. More generally, sanctions lists aim to counter:

• Terrorism and terrorist financing
• Drug trafficking
• Human rights violations
• Arms proliferation
• Violation of international treaties, e.g. arms embargo
• Money laundering activities

How do sanctions lists work?

Governments and financial authorities around the world maintain various lists of targeted sanctions. Examples of sanctions lists include the Specially Designated Nationals and Blocked Persons (SDN) List of the United States and the consolidated lists used by the United Kingdom , the European Union , and the United Nations . Sanctions lists are generally available online, so companies are free to research and review them before entering into a relationship with a foreign person or entity.

Sanctions lists should play an important role in a financial institution’s anti-money laundering (AML) policy – ​​and will have a significant impact on how that institution does business and with whom.

The use of sanctions lists

While sanctions lists are conceptually simple, in practice they involve the processing of enormous amounts of data, including not only the names of people on the list but also peripheral details such as known aliases and names. ‘Geographic location.

Since many companies routinely deal with a large number of customers and transactions, reviewing sanctions lists using a risk-based, case-by-case approach is a significant administrative challenge, even an impossibility. With this in mind, businesses can incorporate a range of useful filtering tools to make the search process much more efficient. However, when choosing a monitoring platform, compliance requirements should be a priority: Anti-money laundering officers should ensure that their platform is regularly updated to ensure its relevance and accuracy.

Reporting obligations

To comply with regulations, financial institutions need to know what to do when they receive a name match on a sanctions list. The first step should be to establish the likelihood of a match: many people use similar names, so false positives are common. Peripheral information, such as geographic location, can be used to establish the accuracy of the match – again, filter providers can help by adding contextual detail to searches and thus increasing efficiency of the resolution process.

When it is certain that a correct match has been returned, institutions should contact the relevant financial authority and await instructions.

Stay ahead of sanctions updates and protect your business with our proactive sanctions list checker.