Is it time to reassess your ‘risk-based’ approach in light of latest Russian sanctions?

In the UK, businesses regulated by the Money Laundering Regulations must take a ‘risk-based’ approach to preventing money laundering.

This means they must identify and assess the risks of money laundering to their business, and then put policies, controls and procedures in place to reduce those risks. This will include running due diligence on all new customers and ensuring all the information about each customer is kept up to date.

For most businesses, the initial due diligence process is the same - first the customer is identified and verified, then they are screened against Global PEP and sanctions lists. If the customer passes these checks, they are onboarded, and the regulated business then has an obligation to keep the customer records up to date.

Under the ‘risk-based’ approach, it is up to the business to decide how this is achieved. For many this will involve running fresh due diligence and screening every year or so, for others it will be more frequent. And while monthly, six monthly or even yearly checks may have been sufficient in the past,  the extensive sanctions recently imposed against Russia highlights the importance of having a much more frequent monitoring system in place.

Collette Allen Client Services Director at SmartSearch said: “Putin’s invasion of the Ukraine and the resulting sanctions imposed against Russia are a perfect example of why regular monitoring is absolutely imperative for regulated firms in the UK. There are now a huge number of Russian individuals and organisations that UK businesses are banned from transacting with, and businesses that only run checks every few months, or every year or two could unknowingly now be working with them.

“That is why we offer our customers an ongoing monitoring service that checks all customer details every night against global watchlists meaning that as soon as there are any changes to risk, they are notified.

“Regulated firms that do not have this level of monitoring will need to run fresh sanctions checks on all existing customers now to ensure none of them are now subject to sanctions. We can help with this - our High Risk Country Report tool enables businesses to immediately check their existing customers for links to Russia, Belarus, or any other high-risk countries.

“This is a fantastic solution for any businesses worried about the impact of the new sanctions on their business. Of course, ongoing, we would recommend all regulated firms use a monitoring service like ours, that way if anything like this happens again, they will be alerted immediately if they  need to take any action.”

SmartSearch’s Batch Upload service enables regulated firms to upload multiple individuals onto the SmartSearch platform via a single spreadsheet and then screens for PEPs and against Global sanctions lists. SmartSearch’s ongoing monitoring then regularly checks all names for any changes, ensuring that if further sanctions are imposed, any individuals or businesses affected will be immediately identified.

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