Guest Blog: Six Steps For Effective Sanctions Screening from Melissa
Throughout 2022, techUK has seen a considerable increase in requests from members to support them in understanding, clarifying, and complying with the sanctions regimes of the UK and other governments including the EU and USA. While enhanced sanctions against Russia and Belarus following the invasion of Ukraine have been at the forefront of the news agenda, the UK currently has 38 active sanctions regimes against a number of countries, administrations, and thematic groups.
In this guest blog, Barley Laing, UK Managing Director of techUK member Melissa , provides practical guidance on the steps that companies can take to ensure compliance with complex sanctions regimes.
Six steps for effective sanctions screening
By Barley Laing, the UK Managing Director at Melissa
The invasion of Ukraine has sparked a proliferation in sanctions against leading politicians, businesspeople and entities in both Russia and Belarus.
Many organisations find it difficult to keep up with the plethora of sanctions announced by the UK, and other states, which they are legally required to adhere to.
Failing to properly assess for sanctions - which is the responsibility of the compliance team and increasingly those in technology as the sanctions process becomes progressively digitised - could see businesses facing hefty fines. Also, they are likely to experience significant brand damage resulting from the negative publicity associated with providing services to someone who’s been sanctioned.
There are six steps to ensure effective sanctions compliance:
- Source sanctions / watchlist data from trusted global sources
The best way to ensure compliance with sanctions is by having access to up-to-date sanctions lists, also called watchlists. For a long time, these lists have played a vital role in ensuring organisations effectively undertake know your customer (KYC) and anti-money laundering (AML) checks when onboarding customers, as well as when running regular cross-checks against those on their existing databases.
To deliver effective sanctions screening today these lists must be part of an automated tool that collects and synthesises sanctions data from a wide range of trusted sources worldwide, such as governments, regulators, and credit agencies. Additionally, they should be able to continually scan for updates and deliver them in real-time. This way it’s possible to provide a smooth user experience for those signing up to services – something many people expect in the digital age. It’s a much more efficient and accurate approach compared with undertaking manual checks, which are costly due to the additional costs of employing and training staff for this purpose. Also, physical checks are likely to lead to mistakes being made, which could leave your organisation exposed to sanctions breaches and the associated cost in fines and to your reputation.
- Undertake politically exposed persons (PEP) screening
For a wider best practice approach to sanctions checks, organisations must obtain politically exposed persons (PEP) data from around the world. A PEP is defined as ‘an individual who is or has been entrusted with a prominent public function’. It is ideal to screen for them in the early stages of any onboarding activity. Along with PEPs it’s vital to have details of relatives and close associates (RCAs) of PEPs, as well as those sanctioned. The reason is there’s a tendency for these groups to be involved in or drawn into crime.
- Implement adverse media checks
Monitoring the latest news and alerts in real-time is essential, not only to source information on those facing sanctions, but also on PEPs and anyone else who could have potential negative regulatory, financial, or reputational consequences to your organisation. It’s critical that the tools used to undertake adverse media checks can scan the global news media, sourcing information on those with new sanctions against them, and where legal cases are pending.
- Sanctions training for tech and compliance staff
Staff must have a clear understanding of the latest sanctions measures and know how to handle those individuals that are impacted by them. With technology and compliance staff on the front line when it comes to acting on the sanctions data, suitable training and guidance must be provided.
- Update systems and controls – onboarding and payment screening technology able to act on those sanctioned?
As well as training staff on how to react to customers who have been sanctioned, can your organisation’s onboarding and payment screening platforms effectively do the same? Once those sanctioned have been detected in your database, do you have the systems in place to quickly block transactions and freeze funds? It’s vital to have processes in place to immediately act on this information.
- Undertake a broader approach with automated identity verification
An automated tool that in real-time sources those on disparate sanctions lists, including PEPs and RCAs, works well as part of a more comprehensive approach to automated KYC and AML operations. It’s why there’s growing interest in using electronic identity verification (eIDV) tools, which as well as having access to comprehensive sanctions data, PEPs and RCAs, are able to cross-check user-provided details against reputable data streams to ensure they are who they say they are in real-time.
By taking thee six steps organisations will have access to continually updated real-time sanctions data, including data on PEPs and RCAs, from governments and regulators worldwide to ensure compliance with sanctions data. With automated functionality, these lists can be easily used in conjunction with comprehensive automated eIDV technology, for example, for an accurate, quick, and cost-effective KYC and AML process.