The AML sanctions screening procedure is conducted by commercial organizations to ensure that their activities are not linked to illegal financial schemes such as money laundering and terrorist financing. Such sanction screening services have a number of advantages, which we will discuss below.

The first step is to find out whether customers and partners are on international sanctions lists. These are lists maintained by both states and international organizations containing individuals and entities that are in any way involved in criminal activities or do not comply with the principles and norms established by the international community.

Why does a company need sanctions screening?

This process reduces the risk of conducting transactions with sanctioned individuals. Screening protects against cooperating with entities involved in criminal activities such as terrorist financing, corruption and money laundering. 

The political and economic situation changes every minute, so companies have to react to all of this to prevent unauthorized transactions wherever possible. As a result, fines and business debarment follow, which results in the screening of counterparties in a timely manner.

How does the screening process work?

In general, the screening process itself is to identify individuals, companies or countries under sanctions and prevent interactions with them to minimize legal and financial risks. Its objectives are:

  1. Information collection. At this stage, the company collects data on its customers and partners and conducts a check against the lists. The collected data is checked against national and international sanctions lists (e.g. UN, EU, OFAC). These databases are updated in real time to avoid interactions with sanctioned entities.
  2. Risk assessment and monitoring. Once screening is complete, risk assessments are conducted. Companies use automated systems to continuously monitor updates to sanctions lists, as the status of partners can change over time.
  3. Documentation of results. All activities related to the verification should be documented for internal control and possible submission to regulators as evidence of compliance with the law. These documents confirm that the company has met its compliance obligations. If necessary, they may be shared with regulators.

This documentation is proof that the company has fulfilled its compliance obligations. It can be shared with regulators as needed.

Process automation

In a rapidly changing global environment, many companies are opting for automated sanction screening solutions. Implementing sanction screening services significantly improves the quality of inspections and eliminates potential errors caused by human error. Automation allows you to:

  1. Update sanctions list data quickly, enabling you to respond to changes as they occur.
  2. Quickly and efficiently check a large number of counterparties, reducing time costs and mitigating risks. 

Sanctions screening should consider not only names, but also business risks, company ownership structure, and geographic risks. For example, a company may not be directly under sanctions, but may be linked to a sanctioned person or entity through a complex ownership structure.

Consequences of non-compliance with the sanction regime

Ignoring sanctions checks can lead to extremely negative consequences. Violations of the sanctions regime entail large fines, criminal liability for company executives and a ban on doing business in a number of jurisdictions. In addition, the loss of business reputation can have dramatic consequences – clients and partners lose confidence, which directly affects the company’s financial performance.

Sanctions screening is not just a practice, but a simple and mandatory requirement for any company operating in international markets. A company that builds appropriate processes in a timely manner not only protects itself from fines and monetary losses, but also earns significant reputational value as a loyal organization.