How to Comply with EU Sanctions
EU sanctions compliance is an important priority for all firms that operate within EU jurisdiction. However, the scope of the EU’s sanctions regime is expansive which means that screening customers against the Consolidated List can be a significant challenge: not only do firms have to detect and remediate potential sanctions violations quickly and efficiently, but ensure that their compliance solution does not become an unsustainable administrative burden by generating too many false positives.
With that in mind, obligated entities within the EU should consider the following factors when implementing a Consolidated List sanctions screening solution:
Accuracy and reliability: Sanctions designations are added and withdrawn from the Consolidated List on a regular basis. Firms should ensure that their sanctions screening solution is updated regularly with the latest Consolidated List data to ensure accuracy and reduce false positive identifications – or worse, false negatives.
Sanctions relevance: EU sanctions measures differ based on the regime under which they are imposed. Sanctions measures imposed under the GHRSR may only apply to individuals or organizations, while sanctions imposed under the autonomous regime may apply to entire countries. Firms should ensure they understand the relevance of sanctions measures to both their business and their customers.
Customer data: In order to optimize accuracy, sanctions screening should be built on robust customer data. Accordingly, firms should perform suitable customer due diligence (CDD) when beginning a new business relationship in order to properly understand the sanctions risk that their customers present. Customer risk profiles should be built out with supplementary (secondary) identifiers and information in order to add a greater degree of accuracy and insight in the event of duplicate results or to help remediate false positives.
Naming conventions: The names of entities and individuals designated on the Consolidated List may not follow traditional western naming conventions and so increase the risk of both false positive and false negative identification when processed by a screening solution. Accordingly, Consolidated List screening solutions should account for the use of non-Western naming conventions, non-Latinate characters, nicknames, and aliases.
Ongoing monitoring: The sanctions landscape is constantly changing with new designations introduced to the Consolidated List frequently. With that in mind, firms should seek to verify their customers’ sanctions exposure on an ongoing basis, including monitoring customer transactions to ensure they are not doing business with third parties that are themselves subject to sanctions. Firms should also seek to monitor for changes in their customers’ Politically Exposed Person (PEP) status which may be particularly relevant to their sanctions designation.