8th June 2021

Global Sanctions Compliance

Common Challenges Organizations Face when it comes to Global Sanctions Compliance

Global sanctions are an indispensable foreign policy tool, helping governments achieve diplomatic and political objectives in every part of the world, and respond to violations of international law, including human rights crimes. In implementing their global sanctions programs, governments make new designations constantly, introducing strict and often complex compliance requirements on firms within their jurisdiction. 

Global sanctions compliance is an important priority for banks and financial institutions and represents a significant anti-money laundering (AML) challenge. Firms must ensure that they do not – knowingly or unknowingly – provide sanctions targets with opportunities to evade the economic restrictions against them by screening customers and transactions against the relevant international sanctions lists. Accordingly, firms must develop and implement a sanctions solution, as part of their AML infrastructure, that is capable of managing sanctions compliance challenges and ensuring that they detect and prevent sanctions violations quickly.

Global Sanctions: What are the Compliance Issues and Challenges?

Given the importance of global sanctions compliance and the potential regulatory penalties that noncompliance entails, firms must ensure that their screening solution is implemented in a way that reflects their risk landscape. Effective screening solutions should be accurate enough to detect threats but not so rigorous that they degrade the customer experience, or so sensitive that they create an unmanageable amount of false positive alerts.   

With that in mind, let’s take a closer at the key compliance issues associated with global sanctions:

Data Accuracy

Relevance

Risk assessment

Internal Controls

Aliases, Nicknames, Spellings

Non-Western Naming Conventions

Secondary Sanctions and Blocking Rules

One of the most significant recent challenges on the global sanctions compliance landscape, is the application of secondary sanctions – and the reintroduction of blocking rules in response. Secondary sanctions, such as those imposed by the US against Iran, prohibit third countries from engaging in trade with sanctions targets that have been designated by other countries. In the case of the US sanctions program, secondary sanctions compel non-US persons to apply US-issued trade restrictions against Iran at the risk of being sanctioned by the US themselves. Secondary sanctions add to the compliance burden: firms must check not only the sanctions lists that apply in their home jurisdiction, but a range of relevant third-country sanctions lists, such as the OFAC sanctions list. 

As a response to the increased use of secondary sanctions, some jurisdictions have introduced blocking rules that essentially prohibit firms from complying with secondary sanctions at the risk of incurring penalty fines. In 2021, China introduced blocking rules to counter the secondary application of US Iran and North Korea sanctions on Chinese firms, while the EU reintroduced its own blocking statutes in 2018 following the US’ withdrawal from the JCPOA. 

How ComplyAdvantage Can Help

While the challenges of global sanctions compliance present differently for every firm, a common factor is the requirement to collect and process vast amounts of customer data. The manual processing of sanctions data can be slow, costly, and involve the ongoing risk of human error. Similarly, remediation challenges can delay the onboarding and transaction monitoring processes creating a range of friction points for both customers and compliance teams. 

Accordingly, firms should implement a solution that meets the specific demands of their risk environment. ComplyAdvantage’s sanctions screening solution is built around versatility and accuracy, offering firms the capability to screen customers against a wide range of sanctions data in near real-time – including over 100 international and national sanctions lists and thousands of government and law enforcement watchlists. 

Our sanctions screening solution is informed by a variety of AML KYC measures and designed to help firms build accurate risk assessments, enrich their sanctions data, and minimize false positives. Those measures include:

  • Customer due diligence: Firms must be able to accurately identify and verify their customers, or the beneficial ownership of customer-entities, in order to match them against names designated on sanctions lists. 
  • Transaction monitoring: Firms should be able to effectively monitor for transactions involving sanctions targets, or unusual financial activities that are indicative of attempts to avoid sanctions restrictions. 
  • PEP screening: AML solutions should be able to identify politically exposed persons (PEP) that might pose a greater sanctions compliance risk as a result of their proximity to government or elected office. 
  • Adverse media monitoring: Customers that are the subject of adverse or negative media stories may pose a greater sanctions compliance risk. Firms should screen a variety of news media for adverse stories, including screen, print, and online sources. 

Beyond its automated speed, scope, and accuracy advantages, our screening solution also incorporates innovative name-matching technology to help eliminate costly false positive alerts and, worse, false negatives, and is configurable to reflect our clients’ unique risk appetites. 

Learn More

View Global Sanctions Guide