Imagine you own a business that has been limited to domestic transactions from its earliest days. You are now getting ready to delve into international transactions. An overseas customer contacts you and wants to place an order. Do you automatically fill it? If you’re smart, you don’t. First, you subject that customer to sanctions screening.
Sanctions screening is a process that searches for countries, organizations, and individuals that have been sanctioned by various governments. If your customer has been sanctioned by the U.S. government, you are likely prohibited from doing business with that person or organization. Going ahead and doing the deal anyway could subject you and your company to stiff penalties – perhaps even prison time.
Unfortunately, sanctions screening is not a straightforward process. In fact, it is one of the most difficult propositions in the entire anti-money laundering (AML) arena. That’s why businesses of all sizes contract with companies like Ohio-based Vigilant Global Trade Services to handle the work for them.
Lists Change Daily
What makes sanctions screening so difficult? The lists that companies have to rely on. They are not static. Those lists change frequently, quite often by the day. An organization not on a list today could very easily wind up being on it tomorrow. Keeping up with the pace of change is one of the most difficult aspects of sanctions screening.
Also consider the sheer number of lists. There isn’t just one. Every nation committed to stopping terrorism and financial crimes has at least one list. Many have multiple lists. In theory, there could be tens of thousands of names on the combined lists. Those names represent individuals, organizations, government officials, and even entire governments.
Sanctions Screening Best Practices
There is no hard and fast way to perform sanctions screening with complete accuracy. With that understood, violators are not necessarily held accountable if they can prove they did their absolute best. Indeed, due diligence goes a long way. In terms of best practices, the big seven are:
- Utilizing up to date screening technology
- Monitoring public and government announcements
- Verifying sanction information reliability
- Verifying sanctions based on geographic relevance
- Verifying sanctions based on naming conventions
- Avoiding errors due to misidentification
- Utilizing human experts where applicable
- Practicing due diligence in data collection.
The most difficult of these seven best practices is addressing naming conventions. In the U.S., we are familiar with the given name, middle name, and surname model. In many Arabic cultures, a person’s middle name is often their father’s first name. Arabic parents can also attach dozens of suffixes to names to denote specific meanings.
Different naming conventions can make it difficult to identify sanctioned individuals. As such, contractors who specialize in sanctions screening have developed methods for addressing and avoiding confusion.
Screening Efficiency and Accuracy
The pace at which screening lists change calls for service providers to develop efficient and accurate means of screening. Again, this is no easy endeavor. In terms of efficiency, there has to be a way to continually collect and compile real-time data. The data needs to be efficiently analyzed and parsed. And at the end of the day, the results of data analysis and parsing have to be accurate.
As you might expect, this is best left to technology. Advanced software capable of collecting and analyzing tremendous volumes of data is what powers modern sanctions screening. If it were not for software solutions, what is already a difficult proposition would probably be impossible.
Is your company impacted by sanctions screening? If so, how do you handle it?