Sanction list screening encompasses methods used to track fraud and other illicit financial activities. Catching fraudsters is much easier with digital payments. However, the fraud ratio is almost the same even in this digital age. This age-old scam is stealing millions of dollars every year. Scammers change the payee’s name or the amount on the check, forge the account holder’s signature, or even steal checks directly from businesses. Sanction list screening software significantly detects fraud. As technology advances, so do scammers. They find ways to manipulate checks and trick individuals.
In a recent incident, 56 individuals were arrested for about $5 million in fraud. They modify stolen checks, deposit in bank accounts, and withdraw instantly through ATMs.
What is a sanction list?
“A list of sanctioned countries, individuals, or entities compiled by governments or international bodies.”
In international finance and trade, global sanction lists serve as comprehensive records of individuals, entities, or countries subjected to economic or legal restrictions by governments. These restrictions are sanctions, punishing those involved in terrorism financing, money laundering, weapon proliferation, or human rights violations. These lists are maintained by various government agencies and international bodies, such as the Treasury’s Office of Foreign Assets Control (OFAC), the United Nations Security Council (UNSC), and the European Union (EU).
Types of Sanctions
Sanctions are like a web of restrictions imposed by governments or international organizations. These sanctions range from financial penalties to trade embargoes to prevent fraud.
- Sectoral Sanctions target specific industries or sectors that send funds and resources to the sanctioned parties.
- Targeted Sanctions focus on terrorist or corrupt individuals and entities, freeze their assets, and restrict their movements.
- National Sanctions involve individuals sanctioned by countries like the US Treasury’s Specially Designated Nationals and Blocked List.
- International Sanctions are imposed by international organizations targeting threats to global peace and security.
- Financial Sanctions freeze assets and restrict access to financial services with sanctioned entities
- Trade Sanctions impose restrictions on goods and services, limited or no trade with sanctioned entities.
- Travel Sanctions: These restrict the movement of sanctioned individuals and limit their international travels.
- Arms Embargoes restrict weapons sales.
- Autonomous Sanctions List differs from UN sanctions, addresses specific foreign policy concerns, and promotes their values. Australian, U.S. & UK governments impose them unilaterally as a foreign policy.
Sanctions Compliance Matters for Businesses
Sanctions Compliance is not limited to banks. Almost all businesses are involved in international transactions and are potential targets for sanctions violations. Financial sectors are mainly responsible for complying with sanctioned list checks. Various sanction lists and watchlists tools are available to verify and investigate customer details to ease screening for businesses.
- Any business dealing with international transactions, including DNFBPs, financial businesses, and virtual asset service providers (VASPs), should comply with sanction regimes.
- Designated non-financial businesses include casinos, real estate agents, metals and stones dealers, lawyers, notaries, accountants, and trusts.
- Virtual asset service providers, including cryptocurrency exchanges or wallet providers, are subject to sanctions compliance.
Automated Sanction screening
Compliance with regulations is a challenging task for financial institutions. Increased rules, expanding businesses, and efficiency mitigation result in complex compliance. Automated sanctions list screening systems overcome many challenges faced by financial institutions.
- Automation reduces manual tasks, such as false positives, clearance, and paper instrument transaction processing. Manual tasks are labor-intensive processes that drain resources and involve human error
- Financial institutions are now moving towards digitization and freeing resources to focus on more strategic compliance.
- AI-powered automated sanction list screening solution alert triage and transaction monitoring. These solutions can analyze data and identify anomalies significantly.
- Automated data analytics produce deeper insights into customer profiles, behaviors, and transaction patterns.
Sanction list screening software
These software solutions identify individuals and entities against global sanctions lists and prevent businesses from engaging with sanctioned entities.
Oracle Financial Crime Compliance (OFCC) provides real-time screening, watchlist management, and transaction monitoring.
ComplyAdvantage is cloud-based and provides real-time screening against various global sanction lists.
Dow Jones Risk & Compliance provides AML and sanctions compliance solutions
LexisNexis Risk Solutions includes sanctions screening, watchlist management, and customer due diligence.
Thomson Reuters World-Check provides access to a global database of sanctions lists, politically exposed persons (PEPs), and other high-risk entities.
Conclusion Sanction list screening prevents illicit activities and promotes security. Fraud is a traditional scam; vigilant precautions can protect businesses from falling prey to these criminals. Financial institutions should adapt to the evolving sanctions checklist screening using technology to streamline manual processes. Looking for expert guidance on sanction screening compliance? Get in touch with AML Watcher for a personalized consultation.