Knowledge base

Sanction Lists

What are sanctions?

Sanctions refer to penalties enforced on government bodies, organizations or individuals for violating rules and regulations. Sanctions are generally placed to protect national security interests and international peace treaties. The usually imposed sanctions range from travel bans and freezing of assets to prohibitions on a certain trade. 

Sanctions are imposed due to a variety of reasons, including 

  • Money laundering
  • Terrorist financing
  • Human trafficking
  • Drug trafficking
  • Violations of treaties

What is a sanction list?

Sanction lists include individuals, organizations and governments that pose a high risk to financial security. These lists play an important role in the Anti-Money Laundering (AML) compliance program of various organizations. Complying with international laws, banks and financial institutions have to regularly monitor sanction lists and ensure that they are not directly or indirectly associated with sanctioned individuals or firms. This in turn helps in increasing financial security and economic stability.

The United Nations Security Council (UNSC) has a consolidated list of all sanctioned individuals, organizations and governments who are engaged in illegal activities including money laundering, terrorist financing, corruption and other financial crimes. Along with this, the OFAC and the EU also formulate lists of sanctioned individuals and organisations. Various other financial bodies across the world follow the UN sanction lists along with their specific countries’ sanctions.

In addition to these sanction lists, it is necessary for banks and financial institutions to have additional screening processes, that for PEPs and adverse media. 

Why is sanction screening important?

Sanction screening plays an important role in any banking system or financial institution’s AML compliance. This screening helps financial bodies identify sanctioned individuals and organizations who expose them to great financial risk. Sanction screening is an essential part of an organization’s due diligence, protecting them from the illicit activities of money laundering and terrorist financing. The kind of sanction screening performed by an organization depends on its specific activities and the jurisdiction of the country it operates in. 

Regardless of an organization’s business activities, it is generally mandated by their region’s jurisdictions to screen clients and customers, especially while dealing with those from sanctioned countries. It is not only important to screen individuals and organisations on the sanctioned lists, but also those who are associated with these sanctioned entities.

What is the importance of a sanction screening tool?

Sanction screening is a long and time-consuming process because it entails screening individuals from numerous lists and then evaluating their risk profiles. Businesses that deal with a large number of clients and transactions find it difficult to screen individuals regularly, and this, in turn, makes them vulnerable to financial crimes.

Using an external sanction screening solutions platform can aid in improving the speed and accuracy of screening since sanction screening providers have numerous resources and databases which speed up their screening processes. Automated sanction screening platforms are also lesser prone to data errors, making the entire process more efficient.

Continuous sanction screening is important for banks and financial institutions because of the constant updates to sanction lists. Due to this, having a high-quality sanction list database is crucial, which is generally harder for individual firms, as compared to sanction screening providers. 

uqudo’s full-fledged database of the world’s largest global lists along with PEPs and adverse media screening can complement your business’s AML compliance program. Our ongoing Screening procedures help us to keep track of the constantly changing sanction lists, making our solutions fast and efficient.  

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