
Effective Sanctions Screening | A Guide for Compliance Professionals

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Sanctions are crucial in combating financial crimes and maintaining national and international security. Firms doing business with sanctioned entities face substantial fines. The US Federal Reserve and Treasury charged Wells Fargo bank $97.8M for breaching US sanctions regulations. After two months, crypto firm Poloniex agreed to pay $7.6 million for violating 66k sanctions. Financial consequences are not only the concern, but global investors avoid doing business with firms that do not fulfil their corporate social responsibility. This highlights how important it is to deploy Anti-Money Laundering (AML) screening solutions to maintain regulatory compliance and avoid heavy penalties.
Sanctions screening is the process of checking whether an entity or individual appears on the sanctions list or watchlist. Such lists are compiled by governments and approved by international organisations to identify entities or individuals on sanctions lists due to the illicit activities they are involved in. Screening against these lists mitigates the risk of financial crimes and protects a business’s reputation in this age of widespread digitisation.
These lists are changing continuously as new sanctions are being imposed. Thus, businesses must regularly screen their clients, partners, and transactions against these lists to maintain regulatory compliance and avoid reputational damage.
Suggested Read: April 2023 Recap: Major AML Fines and Key Events
Avoid Reputational Damage: Facing a sanctions penalty causes severe reputational damage to a business. Thus, financial sanctions screening is crucial to boost a company’s security, prevent it from non-compliance fines, and maintain its credibility in the market.
Sanctions screening was one of the top challenges many Financial Institutions (FIUs) faced in 2022. They were required to keep up with the evolving sanction screening regulations. However, the challenges are more pronounced in traditional sanction screening methods as they need manual efforts to analyse flagged alerts.
Here are the main pain points that a traditional financial crime screening solution faces:
Automated sanction screening helps businesses improve their compliance efforts and minimise the risk of engaging in business relationships with sanctioned entities. The AML sanctions screening solution scans different data sources, including transaction details, client records, and watchlists maintained by government bodies and global organisations. When the system finds a potential match, it generates an alert so that the case should be further investigated by compliance professionals.
Automated sanctions screening helps organisations:
Compliance professionals can use automated sanctions screening solutions to ensure customer due diligence is performed on all associated parties and counterparties. Machine learning helps the solution learn from previous records, mitigating the risk of future errors after an accidental violation has occurred.
Businesses considering choosing the best sanctions screening solution or upgrading their existing programmes should consider the following points:
When choosing an automated sanctions screening solution provider, it’s advisable to inquire about case studies and endorsements. Numerous providers offer illustrations of proof of concept and employ a continuous test-and-improve methodology, closely overseeing the product to identify opportunities for performance enhancement.
Shufti Pro is a leading AML screening solution provider that helps businesses abide by regulatory requirements and minimise the risk of money laundering and other financial crimes. Our robust AML solutions use artificial intelligence that enables them to screen entities and individuals against 1700+ sanctioned lists, watchlists, and Politically Exposed Persons (PEPs) lists. We screen customers against global databases issued by OFAC, Financial Action Task Force (FATF), etc., to protect firms from non-compliance fines. Our AML screening solution stands out from other IDV solution providers because it lowers the number of false positives, reducing the risk of illegitimate transactions. We ensure that our lists are updated to meet the changing regulatory landscape.
Still confused about how can we help your businesses fulfil sanctions screening obligations?