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How Can Financial Firms Benefit From Global Sanction List Screening?

What are sanctions? What is global sanctions list screening? How come complying to Anti-Money Laundering regulatory compliance benefits the firms too? Why are financial firms mandated to comply with Sanctions and Anti-Money Laundering (AML) compliance? In this blog, we will try to explore and learn to answer these questions. 

Why Are Sanctions Used As Foreign Policy Instrument Today?

In the twenty-first century, combat strategy has shifted to arenas that were once thought unimaginable. Countries today do not declare conventional wars against one another. The economic and cyber arenas are now the new battlegrounds. Given the ever-changing geopolitical landscape, countries are now using sanctions as a strategic foreign policy tool to influence the behavior of target entities. 

Major economies like the United States, European Union, Australia, Canada, United Kingdom, are now employing economic as well as cyber sanctions to restrict the activities of individuals, groups or organizations that threaten their national security, and break international laws.

Since Russia has started an unprovoked war against Ukraine, the western countries have come up with a series of economic as well cyber sanctions against Russia to weaken the Russian war machinery against Ukraine. These sanction screening lead to asset seizures, travel bans, trade embargo and expulsion from the international financial system. 

Why Financial Firms Are Mandated to Comply With Sanctions?

For these sanctions to be effectively implemented, banking (such as commercial banks, central banks, microfinance banks, specialized banks, Islamic banks) and non-banking firms (such as Investment banks,  P2P lenders, mortgage lenders, private equity funds,  insurance companies, money market funds, and hedge funds), have a significant role to play in the prevention financial crimes and implementation of sanctions. 

Therefore, the financial institutions around the globe are regulated by the government organizations, international regulatory bodies and law enforcement agencies. Anti-money laundering (AML) regulatory guidelines are devised by the international regulatory institutions for all the financial firms to comply. 

Which Sanction Lists Are Mandated to Comply?

Sanction lists are devised by the government organizations in line with the international laws and following their country’s foreign policy. These sanctions are imposed and implemented with the collaboration of international regulatory bodies and law enforcement agencies. 

These lists are also made public and are made available online to make this information as easily accessible to relevant industries as much possible, so that all financial institutions can access them in mere one click and execute sanctions screening checks. 

  1. Sanction List released and updated by the United Nations organization mandated on all its member states. 
  2. Sanction List released and maintained by the United States government in line with their foreign policy. 
  3. Sanction List released and updated by the “Bureau of Industry and Security” in the United States.
  4. AECA Debarred List released and updated by the United State’s Department of State also provides important sanctioned individual’s data. 
  5. Nonproliferation Sanctions released and updated by the U.S. State Department. 
  6. Financial Sanctions imposed by the European Union in line with their collective foreign policy agendas. 
  7. Sanctions imposed by the UK government in line with UK’s foreign policy and financial regulations. 
  8. Sanctions imposed by the Australian government in line with Australia’s foreign policy and financial regulations. 
  9. Consolidated list by the EU government agency known as the European External Action Service (EEAS).
  10. List of politically exposed persons containing the updated database of world leaders, cabinet ministers, local government ministers of countries around the world, top executives of multinational companies, senior military officials, executives of international organizations like United Nations, World Bank, International Monetary Funds (IMF), International Court of Justice, and others. 

Sanction screening process comprises screening your prospective customers against the sanctions lists released by the international regulatory bodies, and governments institutions. It is to make sure that before starting any business relationship, the potential customer is not sanctioned by any of the government’s institutions and international organisations, such as the United Nations. 

Financial firms are mandated to act in accordance with the above mentioned sanctions checklists. Staying compliant with these consolidated sanctions lists is as beneficial for the financial firms as it is for the international monetary system. Sanction list screening is made an essential part of Anti money laundering compliance requirements. Therefore, Money laundering Reporting Officers (MLROs) are recommended to employ sanctions screening services to detect their potential as well as existing customers to avoid getting embroiled in the financial crimes of their clients. 

How Can Financial Firms Benefit From Global Sanction List Screening?

Sanction screening is not just mandated for the financial industry alone, firms operating in the world of healthcare are also mandated to follow the compliance regulatory guidelines and conduct sanction screening before providing their services. 

Following the regulatory guidelines is a win-win situation for both the business and for the global financial ecosystem. Given the growing ever-increasing and complex compliance landscape, there are a number of sanctions screening services readily available in the regtech markets all around the world. 

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