Global sanctions list check — automating watchlist compliance

The Russian invasion of Ukraine has added many names and entities to international sanctions lists, and the lists continue to grow. An article in the New York Times states, “experts consider the sanctions to be the most robust ever directed at a major economy.”

For regulated (or obliged) companies, monitoring and screening new and existing clients against applicable sanction lists is a vital compliance function. While having a comprehensive screening program has long been a requirement, the velocity and coordinated global approach to these sanctions on Russia indicate that regulators will be demanding quick and thorough compliance on this matter.

The same Times article points to an Internal Revenue Service request for $5 billion more in funding to enforce these and other sanctions. With the increasing focus on sanctions, enforcement scrutiny will likely follow. Now is a good time for compliance teams to:

• Audit global sanctions list check capabilities
• Fix any deficiency, and
• Optimize performance

Sanction lists

If you are a global business, there are numerous sanctions lists to monitor. Many companies monitor a wide range of lists beyond their prescribed requirements to better keep aware of potential risks.

These sanctions lists often referred to as Anti-Money Laundering (AML) watchlists are a compilation of multiple regulatory and enhanced due diligence lists from all major sanctioning bodies around the world, including global and in-country lists such as:

U.S. sanctions list — Office of Foreign Assets Control (OFAC)

Run by the U.S. Department of the Treasury, OFAC publishes trade and economic sanction lists targeting specific persons and companies from named countries and other threats to the U.S. national security, foreign policy or economy.

OFAC has numerous lists. The Specially Designated Nationals List (SDN) covers “individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries” and targets specific people or organizations not connected to a targeted country. There’s also a Consolidated Sanctions List, which gathers data from many other non-SDN lists.

EU sanctions list

The EU has a Common Foreign and Security Policy (CFSP). A part of that policy is restrictive measures (sanctions) on specified governments, entities, organizations and individuals.

The EU provides an online interactive tool that includes:

• Countries with restrictive measures
• People, organizations and entities on sanction lists
• Legal acts for specific restrictive measures
• Restrictive measures guidelines

UK sanctions list — Office of Financial Sanctions Implementation (OFSI)

As part of HM Treasury, OFSI publishes an updated list of all those subject to financial sanctions imposed by the UK. These include asset freeze targets and people with financial and investment restrictions. Note their consolidated list went through a structural change in February 2022.

Canada sanctions list

Canada can impose sanctions under three acts: the United Nations Act (UNA), the Special Economic Measures Act (SEMA), or the Justice for Victims of Corrupt Foreign Officials Act (JVCFOA). There’s also the related Freezing Assets of Corrupt Foreign Officials Act, which enables the freezing of assets of politically exposed persons (PEPS).

The Consolidated Canadian Autonomous Sanctions List includes individuals and entities subject to specific sanctions regulations under SEMA and JVCFOA.

U.N. sanctions list

The United Nations Security Council Consolidated List includes all individuals and entities subject to measures imposed by the U.N. Security Council. As of March 7, 2022, 703 individuals and 256 entities were on the Consolidated List.

Other watchlists

The above lists are only some of the lists that might need checking; there are also:

• Law enforcement lists from Interpol, country-specific government and state agencies and police forces
• Lists from governing regulatory bodies (financial and securities commissions)
• Adverse media lists indicating involvement with negative events that might pose a reputational risk

Global sanctions compliance processes

Depending on what you monitor, there are 240 watchlists in 195+ countries worldwide to consider. People, entities and organizations are added or removed on an ongoing basis. The data is in different languages, formats and structures and requires effective measures for collecting, analyzing and integrating into compliance workflows.

Managing and using all this information is a massive task and needs careful operational control, as potential issues include:

• The risk of penalties, fines and reputational damage
• The high cost of manual reviews of false positives
• The danger of losing customers to mistakes in the identity process and increased friction in account openings and financial transactions

Correctly identifying customers with high reputational risk is a significant cost factor and burden to smooth and timely operations.

KYC screening program

A comprehensive Know Your Customer (KYC) screening program, such as the Trulioo GlobalGateway Global AML Watchlist, will help efficiently weed out bad actors and keep businesses safe from fraudulent activities and financial crime.

Global AML Watchlist provides two critical pieces – identity verification and watchlist checking. First, a financial institution (F.I.) needs to know accurately, and with certainty, the identities of the parties to a transaction. This first step can be a significant challenge since many of the countries most at risk for fraud have poor public records, and criminals are adept at hiding their true identities. Performing identity verification against multiple independent and reliable data sources helps address this problem.

The second step, which runs simultaneously, is to run the identity against a comprehensive set of watchlists. Incorporating watchlists that offer global coverage and lists from all the relevant sanctioning and law enforcement agencies, Global AML Watchlist provides real-time or near real-time checking.

Global AML Watchlist also includes other helpful data sources like scans of news stories that might contain negative mentions of individuals or entities enabling F.I.s to stay current with negative news in real-time.

It’s not enough to screen a watchlist; an effective program needs to make the data useful. Global AML Watchlist is accessible during onboarding new customers and in batch to examine an F.I.’s existing client base. Collecting, normalizing and validating data are part of the process to ensure screening runs smoothly and accurately. Data enrichment also enables the highest level of compliance.

Customizing watchlist procedures

Building on their AML program, firms need to develop standards and strategies reflecting where they do business. They can formulate risk-based approaches that may heighten alerts for some countries while relaxing reviews for countries with their own stringent banking regulation. Access to up-to-date and accurate watchlist information is crucial to gauge risk.

As Garient Evans vice-president of identity solutions at Trulioo points out, Global AML Watchlist sanction lists are

Updated in real-time. So, every time that you see a news alert that another oligarch and his family members have been added to the sanctions list, we are scrutinizing each and every name that comes into our network to see if that individual is on the sanctions list.

By leveraging the latest identity verification technologies and data sources, you have complete transparency and flexibility to adapt to changing sanctions, such as the addition of Russian oligarchs, to sanctions lists.