In today’s international landscape, sanctions represent a growing challenge for specialized anti-money laundering compliance functions.
Sanctions continue to be a growing challenge for anti-money laundering compliance functions: geopolitical events highlight sanctions in the public eye and increase pressure on sanctions screening within financial institutions and companies. In the months following the invasion of Ukraine, much of the aggressor’s financial system was hit by sanctions.
Sanctions: what are we talking about?
In their simplest form, sanctions are political tools put in place against targeted countries, individuals or entities, with the aim of maintaining or restoring peace and security. Their purpose is to change the behavior of the regime or the rulers of the targeted country, individual or entity, with the intention of improving a situation or putting an end to certain activities.
A sanction can be explicit or implicit. Explicit sanctions detail the specific names of countries/individuals/entities. Implicit sanctions are more narrative in nature and can be more difficult to manage. This is the case, for example, with the publication of statements or with a sanction applied to an entity without specifying names.
There are several types of sanctions:
- Economic sanctions – usually a ban on trade, possibly limited to certain sectors or with certain exceptions (food, medicines).
- Financial sanctions – prohibition of the transfer of funds and freezing of assets.
- Diplomatic sanctions – reduction or abolition of diplomatic relations, via embassies for example.
- Immigration sanctions, known as travel bans
- Military sanctions – military intervention
- Sports sanctions, which prevent the inhabitants and teams of a country from participating in international events.
- Environmental sanctions – since the declaration of the United Nations Conference on the Human Environment international efforts to protect the environment have gradually intensified.
For anti-money-laundering programmes in financial services, in the current climate it is particularly important to monitor economic and financial sanctions in order to impede various criminal activities such as those of money launderers, terrorists, drug traffickers, arms dealers and human rights violators.
A sanctions list is a set of individuals, groups and entities that are subject to sanction. As there are many sanctions bodies, the nature of the lists varies, as does their complexity.
For example, the content of a sanctions list owned by one agency may differ from that of another, with one being more detailed and including the individual’s name, recent places of residence, aliases and other ancillary data. In addition, some lists are consolidated lists, such as the one published by the European Union for EU-related financial sanctions, and others are highly targeted lists, such as interpol’s list for international criminals.
Once on a sanctions list, it can be difficult to be removed from it. The issuing body must exercise thorough due diligence to determine whether the person or entity in question no longer presents the risk or threat for which it was sanctioned.