Filtering sanctions: good practices

Sanctions screening is an integral part of AML/CFT regulation worldwide and is essential in the fight against money laundering and terrorist financing. The penalties are serious offenses and can lead to heavy fines. Accordingly, banks and financial institutions should verify customers against the relevant sanctions lists as efficiently and accurately as possible. However, as these lists constantly change, it is necessary to ensure that filtering processes remain up-to-date and efficient, and to avoid inefficiencies and false positives, which is an ongoing challenge for obligated companies.

Given the importance of filtering and monitoring sanctions lists and the potential cost of non-compliance, companies should familiarize themselves with sanctions screening best practices to ensure that their LCB/CFT produce the expected results…

Technological tools

The administrative effort required to perform sanctions screening means that financial institutions must rely on technology to screen lists efficiently and in compliance with the latest AML/CFT rules. To ensure this effectiveness, companies should not only look for stable and proven filtering software with modern features such as fuzzy logic matching, but also schedule periodic benchmarking to identify any gaps in their process and to focus ongoing investments in appropriate areas.

It’s also helpful to implement sanctions technology that can adapt to changing business needs. Businesses should look for filtering software that can handle increased volume of customers and transactions as their business grows.

Sanctions follow-up

Governments and international authorities regularly issue, update and withdraw sanctions. To stay abreast of the latest sanctions developments, companies should carefully monitor public announcements from relevant authorities, periodically updating their internal versions of sanctions lists and adjusting their vetting process to meet any new enforcement requirements. compliance. For verification of any changes, companies must maintain a Sanctions Screening and Monitoring List to check for new sanctions updates.

Reliability check

Financial institutions obtain sanctions lists and related data from many sources and often hire third-party services to do so on their behalf. Regardless of how this data is obtained, best practices require companies to verify the reliability of the sources used. In general, authorities that issue sanctions also host up-to-date sanctions lists online, such as the United Nations Sanctions List , OFAC Sanctions List , Her Majesty’s Treasury Sanctions List, and the Sanctions List. of consolidated EU sanctions .

Even when obtained from reputable sources, many sanctions lists are published in formats that can be modified or edited easily. Companies should check the lists they use and ensure that they have not been altered.

Geographic relevance

Depending on the territories where a company operates, not all sanctions lists will be relevant to that company’s AML/CFT obligations . Similarly, some sanctions are global, meaning they are taken against countries, while others are selective, meaning they are taken against entities or individuals. . To improve the effectiveness of screening and better target their AML/CFT programs, companies should put in place screening processes that take into account the exact penalties and screening requirements that apply.

Naming conventions

One of the most difficult aspects of examining sanctions is the diversity of naming conventions between languages ​​and cultures. This diversity manifests itself in a variety of ways, from missing vowels and contractions, to word order and the use of non-Latin characters. In Arabic, for example, a person’s middle name is their father’s name, and 99 suffixes can be used to describe « God » which can be used after given names such as « Abdul » or « Ahmed ». Beyond cultural naming conventions, consideration of sanctions must also consider the common use of pseudonyms and alternate names.

Accordingly, screening processes should be put in place to account for the many naming conventions, protocols, formats, and pseudonyms that might apply to individuals on a sanctions list. This consideration should be global in scope in order to take into account the cultural diversity of a potential clientele.

Troubleshoot Credential Errors

Names on a sanctions list may be misidentified due to a lack of identifiable or distinguishing characteristics, leaving the possibility of filtering to yield multiple results or false positives. With this in mind, financial institutions must be able to prevent misidentification of customers and must have a filtering process capable of resolving duplicate results.

In practice, the filtering process could start with a standard name search. In the event of a possible identification error or duplication, the next stage of the check should relate to another unique identifier, such as a passport number. If this information is not available, businesses must switch to manual checks or even enlist the help of a third party to ensure that customers are correctly identified.

Invest in human expertise

Technology and automation are fundamental to sanction screening, but human expertise and analysis also play an important role. Beyond training employees to implement technology and navigate sanctions lists effectively, the screening process often generates ambiguities that can only be resolved through informed human judgment.

With this in mind, financial institutions should invest in the training of competent human teams in terms of compliance. Similarly, financial institutions should establish a regular schedule of sanctions training updates to ensure that the specific compliance skills of their employees remain relevant and effective.

Prepare customer data

Sanctions screening can only be effective if the information a financial institution holds about its customers is relevant, accurate and accessible. In concrete terms, this means that companies must properly apply the basic principles of customer due diligence and ensure that the identification data they collect about their customers is both sufficient and of the highest quality. In addition to these fundamentals, companies should practice data enrichment: building customer profiles with secondary identifiers to add certainty and avoid false positives.

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