Sanctions are restrictions imposed on individuals, entities or countries; in an effort to curb their activities and apply pressure on them to change their unlawful pursuits. This is brought about when such individual or country is found to breach an international law or human right, or indulge in illegal activities like drugs and human trafficking. Sanctions are also used to target the activities of terror organisations and those involved in arms and nuclear proliferation. Sanctions can take various forms, but the most relevant types are economic restrictions, financial sanctions, trade sanctions, or asset freeze.
What are Financial Sanctions?
Financial sanctions are usually international lists compiled by the UN and the EU directives, circulated as Sanctions Lists. Businesses and financial institutions have an obligation to ensure compliance with financial sanctions, including ongoing monitoring of transactions. To ensure compliance with financial sanctions, it is necessary that businesses monitor both the international and national databases of Sanctions List and the UN Sanctions Committees list related to activities of terrorism and the proliferation of weapons of mass destruction.
The penalties for breach or non-compliance are contained in the statutory laws of each nation.
What are Sanctions Lists?
Sanctions Lists are lists of specifically designated nationals, designated persons or entities and include:
– “Specially Designated Nationals and Blocked Persons” maintained by the OFAC
– “Specially Designated Global Terrorist” maintained by the OFAC
– “Consolidated List of Financial Sanctions Targets and the Investment Ban List” maintained by Her Majesty’s Treasury
– “Targeted Sanctions” by the UN on certain groups or individuals, or political elites in a target country aimed at reducing any collateral damage to the financial system
– “Selective Sanctions” by the UN, to place restrictions on particular products or financial flows, such as ban diamond trading with a sanctioned country
– Or other similar list maintained by, or publicly declared as Sanctioned Designation by any of the Sanctions Authorities, like the EU.
The lists are amended, supplemented or substituted from time to time.
The Sanctions Lists provide information that help decide whether you are dealing with someone who is subject to sanctions, and lists:
– Full name
– Any known aliases
– Honorary, professional or religious titles
– Date of birth
– Place of birth
– Passport details
– National identification numbers, such as ID cards, Social Security Numbers.)
– All known addresses
– Any additional information considered useful, such as aliases, details of family, positions held)
– Title of the financial sanctions regime under which the designated person is listed
– The date when the designated person was added to the list
– Last updated information
– A unique ID reference number assigned to the designated person/entity
What are Sanctions Checks?
Sanctions checks are detailed searches against the government and international databases for Sanctions Lists of individuals, entities, countries or organisations who are legally barred from certain activities or industries. Sanctions checks are a part of the anti-money laundering/counter terrorism financing (AML/CTF) compliance requirements.
Checks against Sanctions and Watch Lists put out by governments, financial market regulators and law enforcement agencies are mandatory for regulated entities. In many sectors, employers are also required to undertake a Sanctions Check on any employee who has the potential to impact the financial integrity.
Which Sanctions Lists are searched?
Sanctions Check currently search more than 450 Sanctions and Watch Lists and Politically Exposed Persons (PEPs) in over 190 countries. The Lists are updated daily to identify sanctioned, restricted, prohibited and high-risk individuals – money launderers, fraudsters, politically exposed persons (PEPs) and terrorists.
What is a Sanctions Lists used for?
The Sanctions Lists are used for Sanctions Checks during the customer KYC onboarding process, and as an ongoing customer due diligence. This is a mandatory requirement for all businesses and financial institutions that are “regulated entities” under a nation’s jurisdiction.
What is the importance of Sanctions Checks?
Sanctions Checks/Screening examine the Sanctions Lists to check if any investor or entity is engaged in an illegal business or financial transaction, or involved in terrorism, so that appropriate action may be taken. This includes filing reports, as well as exercising diligence while onboarding customers on the Sanctions and Watch Lists.
Breaches in Sanctions Screening and failure to identify Politically Exposed Persons (PEPs) have the potential of attracting penalties.