In the modern world, financial crime has become more sophisticated and financial organisations are required to take preventative measures to prevent crimes and help protect the global economy.
Part of the fight against financial crime is anti-money laundering checks, and a crucial part of this process is sanction checks. In this blog, we’ll explain what sanction checks and screening are, how the process works and why it’s so important to have a robust screening process.
To protect your business's reputation and effectively screen customers, we have intelligent AML software at SmartSearch that simplifies the process.
In relation to anti-money laundering measures, sanctions refer to restrictions and penalties put in place by governments or financial authorities. Sanctions are put into place when individuals have been found to be involved in money laundering, financial terrorism, fraud, etc.
There are many types of sanctions that can be imposed by governing bodies, from freezing assets to bans on travel or trade restrictions. These measures are enforced not only to deter would-be offenders but to protect organisations and countries from the risk of financial crime or corruption.
Some authorities that can impose sanctions include:
Once a sanction is issued, the individual or organisation is added to the system, where their data will be recorded on a number of sanctions lists. These lists are used to help businesses identify higher-risk customers and protect other organisations against financial crime. There is a wide range of sanctions lists all across the globe, but the most commonly used in the UK is the Dow Jones watchlist.
A sanctions check is the process of screening customers against official sanction lists to identify if they have sanctions placed against them. These checks are designed to ensure that your business doesn’t become involved in financial crime or form relationships with known money launderers.
Sanction checks are carried out at the start of the onboarding process, where a customer will provide their personal information and identity documents. This data is then processed and fed through various sanction lists, where a match will be identified if their information is present.
These checks need to be carried out by any financial institution, including banks, fintech companies, insurance providers, estate agents, etc.
Sanction checks aren’t just crucial for preventing fraud; they’re also a legal requirement. Any financial organisation must conduct sanction checks on any potential customers, and there are harsh penalties for companies that fail to conduct or have ineffective checks.
Consequences can range from reputational damage to fines, operational restrictions and even criminal charges.
Alongside personal consequences for your business, sanction checks are the first line of defence against financial crime. This process helps to contribute to global security efforts and reduce the level of harm caused by financial criminals. Fraud, money laundering and financial terrorism can all have devastating effects on the individual and institutional victims of these crimes. It’s your duty as a financial firm to help fight these crimes when conducting AML checks.
Sanction checks involve processing personal data and identity documents and comparing these details to sanction lists. This process is often automated in modern systems, which saves valuable time and resources.
The process starts by requesting details from your customer, including their full legal name. Date of birth, address and identity documents like a passport and a valid driver's licence. This information is usually submitted online or via an app.
Once your company has received the data, your intelligent software will automatically run it through the system, comparing against a wide number of watchlists, including Dow Jones and other sanction lists. If the process is not automated, a team will manually enter the data into the system and conduct searches, but this can take much longer from a few hours to several days.
If any customer information matches that on PEP or sanction lists, an alert will be issued and your team notified. From here, your AML officers will assess whether the match is true or false and additional investigation may be required. This can involve conducting enhanced due diligence checks where more information is requested from governing bodies. If a match is confirmed, it’s your job as an organisation to reject applications or conduct a Suspicious Activity Report.
Sanction checks are not just performed once, and they are required regularly to ensure compliance.
Sanction screening needs to take place include:
Customers’ sanction statuses can change at any time, so regular sanction checks are essential to ensure compliance and protection.
Automation is a huge part of modern-day sanction checks, and there are a number of benefits of automated document verification and screening processes. Automating sanction checks not only increases accuracy and reduces false matches, but it also helps to significantly reduce onboarding times and internal costs. Manual checks can be lengthy and also require a whole team of experts who need regular training and salaries.
By automating the process, not only is human error reduced, but you can allocate resources more efficiently for further checks and AML processes where needed.
Sanction checks are a vital part of anti-money laundering processes and help to improve customer relationships, prevent financial crime and ensure legal compliance. A robust sanction screening process is essential to protect your company and partners from penalties and harm.
Here at SmartSearch we have an intelligent screening process that incorporates TripleCheck technology to verify customer identities and confirm matches across global sanction lists in seconds.