This article will help you:
- Understand what sanctions lists are and how they are categorised.
- Find advice on how to avoid risks posed by outdated sanction lists.
- Learn about the best practices in compliance and ways to stay ahead.
According to statistics published by the Statista Research Department, there were over 10,600 sanctioned Russian individuals between February 2022 and February 2023, with around 4,000 more companies and institutions. Thousands more sanctions have been imposed against Iran, Belarus, and North Korea.
We are living in one of the most sanctioned eras in recent history, and when you consider the strict penalties imposed on those who break sanctions, as well as the wide-reaching impact that they have, it has made things very complicated for modern businesses.
Avoiding sanctions and penalties is tough, and it is further complicated by outdated sanctions or outdated sanction lists.
The Role of Sanctions
Sanctions lists and AML (anti-money laundering) compliance are there to protect companies and consumers, while also ensuring that the needs of the state and regulators are met. But companies can only work with what they have, and neither unintentional negligence nor technological shortcomings are a viable excuse.
For instance, if the sanctions lists that a company uses to screen its clients are outdated, it could result in them doing business with an entity that places their operations at risk. There are also hefty fines and even prison sentences imposed on individuals who break sanctions.
In the United Kingdom, for example, individuals who break sanctions could face up to 7 years in jail, along with fines of up to £1 million. Obviously, mistakes are not likely to be judged as harshly as people who wilfully break the rules, but the implications are serious either way.
Understanding Sanction Lists
Sanctions lists are official lists of entities subject to certain restrictions or increased scrutiny. In the last year or so, we have seen a lot of sanctions against Russian entities, including oligarchs, politicians, and companies.
In the words of the UK government, these sanctions are aimed at motivating Russia to “cease actions destabilising Ukraine”. But sanctions are not just used against entities that support or fund conflict. They are also used to restrict the activities of people linked to terrorism, human trafficking, and drug smuggling.
Sanctions usually fall into one of the following categories:
- Diplomatic sanctions: A type of sanction that restricts the access and rights of diplomats and other agents operating on behalf of the state.
- Military sanctions: Includes arms embargoes, designed to restrict access to certain weapons and thus limit the military capacity of a country or organisation.
- Economic sanctions: These sanctions include trade embargoes and are often used to weaken a country’s economy.
- Environmental sanctions: A relatively new form of sanctions that focuses on protecting certain areas and species.
- Sports sanctions: Restrictions on teams/athletes from competing in specific sporting events
Sometimes, all or most of these sanctions can be applied. In March 2022, just days after the Russian invasion of Ukraine, Bloomberg called Russia the “most sanctioned nation” in the world, mainly because several of the above sanction types had been introduced.
With so many sanctions to consider and such severe penalties imposed on those who fail to meet them, it is imperative for companies to implement a carefully considered compliance strategy.
4 Ways to Avoid Outdated Lists
Regulations have changed a lot over the years, not least because of the events in Eastern Europe and the impact they have had on the global finance sector. To ensure that a business remains compliant, they must work with updated sanctions and abide by the latest rules and regulations, and that is as true for sanctions as it is for things such as AML and KYC (know your customer).
Staying ahead in compliance often means keeping the following in mind:
Sanctions lists are maintained by various government agencies, including governments in the UK, US, and EU. Industry regulators and law enforcement agencies may also operate their own lists. A good sanctions risk mitigation strategy will account for all of these and ensure that information is acquired from various sources.
Major financial companies often work with data and compliance experts like A Data Pro to perform real-time updates and ensure that their screening processes are using the latest lists. If there are any regulatory updates or regulatory changes, they will be considered and the screening processes will be adapted accordingly.
Good sanction list management requires expert quality control, experienced data professionals, and stable software. Integrity is key, as there is no room for error, not when the reputation and economics of the business are at stake.
Large Scale Processes
The sanctions list screening process is complicated. A sanctions list is not a short checklist with a handful of well-known names and companies. Screening requires much more than a cursory glance prior to accepting new clients.
There are thousands of sanctioned entities to consider, as well as innumerable AML/KYC regulations, and even elements such as adverse media screening, whereby media sources are scanned for negative reports and potential issues. It is a lot, so it needs an equally sizeable and dedicated process to ensure that all boxes are ticked.
Compliance Best Practices
Meeting compliance challenges requires a holistic and dedicated approach, one that is proactive and provides real-time updates to mitigate the risk of working with outdated lists.
The ever-changing nature of these regulations can create shortfalls in the compliance screening process, so regular auditing is essential. If there are any gaps, they must be found and fixed. Regular risk assessments can help with these issues, as can consulting industry professionals—those who understand how the sector works and know what to expect from future regulatory changes.
As a business subject to AML/KYC regulations and sanctions list, you could be forgiven for feeling like you are drowning in regulatory demands. To make matters worse, regulators are constantly moving the goalposts, with new requests, new demands, and entirely new ways of doing things.But these regulations are making a difference, so they will remain in place and will likely get stricter as governments around the world continue the ongoing fight against money launderers, war criminals, fraudsters, and traffickers.
Looking to Stay Ahead in Compliance? We Can Help!
Sanctions lists are integral to the safe and stable operations of countless modern businesses. If your business is required to perform sanction list screening, you must make sure that:
- You are always working with updated sanctions lists
- You do not expose your business by working with outdated lists or technology
- Your efforts span multiple sanctions lists from various authorities
- You work with professional and knowledgeable data experts who utilise state-of-the-art technology
A Data Pro can help you with all of this and more. We provide our clients with a comprehensive and dedicated approach, along with a rapid turnaround time. We check various sanctions lists and can also utilise practices such as adverse media screening and data cleaning to help you stay on top of regulations and avoid penalties.
To get instant updates on sanctions lists and to ensure complete compliance, contact A Data Pro today!