The Growing Challenge of Sanctions Screening
The Thomson Reuters Anti-Money Laundering Insights Survey of 2022 revealed that sanctions screening has become a significant hurdle for many organizations. With the continued use of economic penalties to resolve military conflicts, such as Russia’s invasion of Ukraine, staying compliant without a robust sanctions screening program has become nearly impossible.
Risk of Fines and Reputational Damage
Sanctions not only play a critical role in national security and international peacekeeping, but they are also crucial in combating financial crimes. As such, firms that continue to engage in business with sanctioned governments, legal entities, or individuals face substantial fines. In the United States, these penalties can exceed several million dollars.
However, the consequences extend beyond financial losses. Global investors and citizens now demand genuine corporate social responsibility and are quick to distance themselves from companies that fall short. Firms face the risk of reputational damage, as a missed screening can be seen as a failure to make a positive impact.
The Biggest Challenge: A State of Flux
Nevertheless, effectively checking whether customers are on the Office of Foreign Asset Control (OFAC) sanctions lists is easier said than done. The screening process presents several challenges:
- Sanctions lists undergo frequent updates, sometimes even daily. Each time a new list is published, it must be checked against the existing customer base.
- A customer’s know-your-customer (KYC) profile can evolve over time, necessitating the maintenance of up-to-date internal data.
- Financial and trade sanctions are complex, with each restriction designed differently to achieve a specific outcome. They can vary in their scope, targeting individuals, organizations, or entire states. Some sanctions have expiration dates, while others are indefinite. Understanding the application of each relevant sanction requires time and effort.
- Sophisticated methods used by restricted parties to evade detection, such as setting up shell companies to control prohibited firms, pose another challenge.
- Typos, misspellings, or different naming conventions can lead to incorrect screening results, particularly when dealing with foreign entities.
Additionally, depending on the size and type of business, the volume of customer data to be analyzed can make it practically impossible for one person or a small team to handle.
The Critical Role of Automated Tools
To tackle the constant changes and complexities of sanctions screening, organizations must leverage appropriate technology. Relying on manual or paper-based solutions increases the risk of errors, such as incorrect, duplicate, irrelevant, or incomplete data. These errors can result in high numbers of false positives or missed screenings. Manual data cleanup efforts leave little time for essential tasks like analysis and reviewing alerts.
Adopting advanced technology can streamline compliance steps and improve efficiency. Automated solutions that integrate up-to-date internal customer data, external sanctions lists, and public records allow for faster and more accurate screening. By reducing manual data entry, these tools enhance data quality and generate more precise alerts.
Digital monitoring, which aggregates relevant news and online information, reduces the effort required to keep up with changes. Advanced data analytics tools enable faster and better-informed decision-making.
Enhancing Sanctions Screening Protocols for Better Compliance
While automated tools provide greater efficiency, a reliable screening process still requires human involvement to ensure nothing is overlooked. To strengthen sanctions screening procedures, organizations can take additional steps, such as:
- Providing regular training to employees.
- Conducting annual tests to verify the effectiveness of the screening tool.
- Engaging experts familiar with the customs, language, and business environment of foreign entities.
- Identifying vulnerable areas of the business that are more susceptible to engagement with prohibited companies or individuals.
- Evaluating ownership information to ensure that entities not on sanctions lists are not controlled by prohibited parties.
By combining cutting-edge technology with trained professionals well-versed in the sanctions landscape, organizations can establish a comprehensive program that minimizes the risk of sanctions non-compliance.
Garrity Traina: Your Partner in Sanctions Compliance
Garrity Traina understands the challenges of sanctions compliance and offers tailored solutions to simplify and optimize your screening processes. Our comprehensive suite of Risk & Fraud Solutions provides access to hundreds of adverse media and sanctions lists. Additionally, our global business research capabilities allow you to find ownership information efficiently.
One of our key offerings is CLEAR, an online investigation software designed to consolidate extensive live data and public and proprietary records. CLEAR enables quick identity verification and provides immediate insights on individuals and businesses. Its intuitive and user-friendly interface allows you to access relevant content conveniently. With CLEAR, you can confidently compare information, identify potential concerns, and significantly reduce the time spent reviewing cases.
Stay ahead of risks through our sanctions monitoring and alerts specifically tailored to your business needs. Discover more about Garrity Traina’s Risk & Fraud Solutions today.