The international sanctions landscape is constantly evolving, making it a challenge for organisations to keep up with the latest regulations and avoid costly mistakes. In the ever-changing environment, sanctions screening has become an essential part of compliance across many industry sectors.

With sanctions screening, you can ensure that your existing or potential customers are not present in any of the sanctions lists. The purpose of this guide is to introduce you to the challenges in sanctions screening and provide you with practical tools and strategies to overcome them.

What is sanctions screening?

Definition of sanctions screening

Sanctions screening is a control used to identify and mitigate sanctions exposure and related risk factors. Companies use sanctions screening to detect and weed out sanctioned persons and entities, and protect themselves from the legal consequences of sanctions evasion. Sanctions screening can help you to identify areas of potential sanctions concern and guide you in making educated decisions.

Sanctions, sanctions lists, and sanctioning bodies

You can stay away from trouble by keeping yourself up-to-date with the latest sanctions and implementing sanctions screening controls.

Who needs sanctions screening and why?

Common sanctions risks to organisations

For most regulated institutions, compliance with sanctions is a major pain point. It creates a tense, high-stakes environment, where every decision you make can have a potentially devastating effect on your business and operations. Without a system in place for customer and transaction screening, you put your company at greater risk of fines and other penalties.

Failure to comply with the sanctions can negatively affect your relationship with your customers, partners, and regulators, which is a serious concern, especially if you want to stay in the same industry. In 2020, HSBC’s share price plummeted due to the allegations of money laundering, which resulted in a fine of £63.9m by the UK’s financial regulator.

But fines are not the only danger to your business. If you are found to be knowingly breaking rules, you risk eroding trust, damaging your organisation’s reputation and credibility, and losing customers in the long run.

Sanctions compliance is not about checking boxes, targets, and numbers. You should make sure that your customers are screened on a regular basis to maintain compliance in the ever-changing sanctions landscape.

Advanced technology solutions can help you to make your sanctions compliance process simpler and smarter.

Organisations and industry sectors at risk

The need for sanctions screening extends beyond regulated institutions. By law, all businesses in all sectors have to comply with all relevant international sanctions. Traditionally, the stakes were higher for businesses operating in the financial services space, but that’s no longer the case, as regulators have started focusing on other industries as well. But it’s not just sanctions violations that can spell trouble for your business. Failure to have a high-performing sanctions screening system in place can be as damaging to your business as the sanctions breaches themselves.

Why is sanctions screening important?

Current challenges in sanctions screening

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Every year and every day we make more transactions, which means more sanction checks and more operational pressure on compliance teams. The inability to cope with the growing workload can lead to total loss of control and undermine your best efforts to stay compliant with the latest sanctions.

The challenges in sanctions screening come from how often sanctions lists are updated and how soon compliance teams can adapt to the changes. It’s important to remember that while the public sector introduces new sanctions, the private sector alone bears the burden of implementing them, making sure that all the screening checks are in place.

Your team must have access to the latest data, and make decisions quickly. But there are more challenges that can turn your sanctions screening programme into a living nightmare.

Lack of cultural knowledge. In Estonia, alert hits between Estonian and Arabic names (Anu Tali vs. Abu Talib) are very common. Transliteration can be a big issue. Alert hits between company and personal names can create unnecessary confusion for compliance teams, unless your compliance agents are equipped with the knowledge, awareness, and understanding of different linguistic contexts.

Without a good cultural knowledge, your compliance team will struggle to properly review and investigate screening alerts. The same goes for your sanctions screening system. You must put a great deal of effort into training the model and improving the connections between the names and the screening logic. The language training is based on semantics, it takes time to get things right, so you should be prepared for a long slog.

Lack of training & high employee turnover. Compliance agents struggle with mundane and repetitive tasks, which are only set to increase as the new sanctions create more workload and operational pressure. This results in a highly volatile work environment, where employee retention and productivity can become a real problem.

You have to make sure that everyone plays as a team, for your team and with your team. Your compliance agents must undergo a rigorous training process, adapt to new technology, and develop competence.

Avoid falling into the trap of growing your compliance team to the point where you don’t have time and budget to properly screen and manage your new hires.

Rising operational costs. You need to have a clear understanding of who you want to screen and why. Over-screening creates higher operational costs, adding more burden and demanding more time and effort from your compliance team. Every sanction check increases the costs for the end users, which, in turn, creates more friction.

Growing number of false positive alerts. You may think that screening your entire customer base will give you a higher degree of confidence in the results. But, quite the opposite, over-screening can generate too many false positive alerts that will need to be reviewed separately to confirm they are not sanctioned.

Nowadays, many, if not most, of your false positives can be resolved automatically using sanctions screening software. You can read more about that below.

Customer friction vs. customer satisfaction. Customer friction is what ruins your customers’ experience with your business and takes away your opportunity to make a positive and lasting impact on your customers. Sometimes customer friction is something that just happens. But we know what can make it much, much worse:

✔️ Suspending your good customers’ transactions for sanction checks.
✔️ Leaving your customers in the dark about what’s going on.
✔️ Breaking hearts, not delivering on promises, missing the deadlines.

As a result, you generate a lot of frustration and get some bad reviews (which would definitely take you off Santa’s nice list). With every bad review, you have to work harder. If you want your business to grow, you should prioritise your customers’ safety and convenience, and create a seamless customer experience.

Lack of alignment between sanctioning bodies. To get the best results from sanctions screening, you have to use every tool at your disposal. It’s important to exhibit extra caution and cross-check the sanctions lists, because, in some cases, the sanctions applied by different sanctioning bodies can be misaligned with respect to each other, the public discourse, and the public’s expectations. One strong example of this is the divergence between OFAC and the EU in relation to Iranian sanctions.

Impacts of sanctions screening

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With the right approach to sanctions screening, you can ensure that your business is conducted soundly and properly, in compliance with the latest sanctions, and reduce the danger of sanctions breaches. An effective sanctions screening system is cost-effective and easy to manage. It helps you to reduce the friction for your customers by giving them a convenient and safe experience.

You can do much more with sanctions screening, though.

Reduce false positives. Incorrect, duplicate, or incomplete data in sanctions screening can generate a large number of false positive alerts. The best way to manage your screening outcomes is to understand and structure your customer data.

There is, however, a way to achieve greater efficiency by automatically resolving obvious false positives in your screening process. We’ll say more about that below.

Minimise manual workload. Growing workload is one of the biggest concerns for everyone in the compliance industry right now. You may think that the easiest way to tackle this is to grow your compliance team until the point it matches the workload.

A system that generates less false positives, has an intuitive interface, and is easy to manage can minimise manual effort and support your team to make a more meaningful impact.

Manage operational costs better. High workload translates into higher costs for your business. Choosing in favour of sanctions screening software rather than relying on in-house resources can help you to keep your team as small as possible, while taking care of most, if not all, of your sanctions screening needs.

Improve employee & customer retention. Your compliance agents don’t want to work on mundane, repetitive tasks. Ensuring a stable and efficient sanctions screening process will not only have a direct effect on your customers, but also on your employees, their productivity and efficiency at work.

A sanctions screening system optimised for maximum efficiency will free up your compliance team to focus on more meaningful, higher-level tasks.

Decrease the risk of sanctions exposure. Although sanctions lists are available in public access databases, things are not as simple as they seem. Just like when you get a prescription from your doctor, you need someone else’s help to decipher and make sense of what it says. If you don’t have enough domain knowledge, you may not be aware of the pitfalls that might happen down the road. There are nearly 100 jurisdictions that have imposed sanctions to date, so keeping abreast of what’s happening is a Herculean task.

How does sanctions screening work?

Components of sanctions screening

There are two major ways to do sanctions screening: name screening and reference screening.

Reference screening requires more work: the system automatically checks and verifies every element in the reference, and if there is more than one mention of the same name, the screening results in multiple matches.

Sanctions screening process

Many think that sanctions screening is a simple and straightforward process. It’s not like quantum physics or anything like that, but the logic behind it requires your sanctions screening system to be consistent and complete. At the end of the day, it’s not just about name matching.

At the start, you want to understand if the person or entity you are dealing with is on any of the sanctions lists. You want to make things quickly and efficiently, and that’s where technology comes in.

Sanctions screening software removes the headache of manually having to search for similar records across many sanctions lists.

Let’s say, you found a name match and it confirmed your suspicion. It’s too early to say that the person in question is who you think they are. There is a second step that goes beyond simply finding a match. To make sure you are dealing with the same person, you have to compare the date of birth, nationality, citizenship, residence, and tax residence, among many other things.

Based on this data, you can draw some conclusions and make a decision with a high degree of certainty.

How does sanctions screening work at Salv?

How to set up an effective sanctions screening process with Salv

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We kickstart the process with data pre-processing. In order for sanctions screening to work as intended, you should collect and hand over accurate and high-quality customer data. Depending on your organisation’s needs and preferences, we can process and screen reference and transactional data.

What makes Salv different from other sanctions screening providers

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As we continue to build up our screening capabilities and align them with new and existing sanctions regulations, criminals too continue to adapt and evolve. Sanctions screening is not a magic bullet. Clearly, there is more we can do to stop bad actors from abusing our systems. Combined with the right approach to transaction monitoring, sanctions screening can act as the ultimate shield against financial crime. It can completely transform your compliance as well as the way you do business. No more sleepless nights worrying about things that are out of your control. We got you covered.

Don’t wait until it’s too late: sanctions screening is something you can explore already today. Have a taste of sanctions screening with Salv and get everything you need to ramp up your sanctions compliance.

Click here to request access to our sanctions screening environment.