Sanctions Check

🔹 Definition

A Sanctions Check is the process of screening individuals, entities, countries, vessels, or transactions against official government or international sanctions lists to ensure that a business does not engage in prohibited dealings. Sanctions checks are a core component of AML/CFT compliance, helping organizations prevent financing of terrorism, weapons proliferation, and dealings with high-risk regimes.

These checks are required by law in most jurisdictions and must be conducted at onboarding and throughout the business relationship.

🔹 Frequently Asked Questions (FAQs)

Q1: What are sanctions lists?
Sanctions lists are issued and maintained by government agencies or international organizations, and commonly include:

• OFAC’s SDN List (U.S. Office of Foreign Assets Control)
• UN Security Council Sanctions Lists
• EU Consolidated Sanctions List
• UK HMT Sanctions List
• MAS Sanctions Lists (Monetary Authority of Singapore)
• Regional and country-specific lists (e.g., Australia, Canada, Japan)

Q2: Who must perform sanctions checks?

• Financial institutions (banks, fintechs, MSBs)
• Corporate service providers (CSPs) and Registered Filing Agents (RFAs)
• Law firms, auditors, insurers, real estate agents
• eCommerce platforms, logistics companies, or crypto exchanges
• Anyone engaging in cross-border transactions or handling customer funds

Q3: When should sanctions checks be performed?

• During Customer Due Diligence (CDD) at onboarding
• As part of transaction screening, especially for cross-border payments
• Periodically as part of ongoing due diligence (ODD)
• Whenever there is a trigger event, such as a change in ownership or jurisdiction

Q4: What happens if a match is found?

• The entity must immediately suspend or reject the transaction
• Conduct a manual review to confirm whether the match is a true positive
• If confirmed, file a Suspicious Transaction Report (STR) or report to the relevant authority (e.g., OFAC, MAS)
• In many cases, assets must be frozen or blocked
• Continuing the relationship could result in civil or criminal penalties

Q5: How are sanctions checks performed?

• Through automated screening systems integrated into KYC or payment workflows
• By using API-based global watchlist services (e.g., World-Check, Dow Jones, Refinitiv, LexisNexis)
• Sanctions checks should include:
  • Name matching with fuzzy logic
  • Country and address screening
  • Screening for aliases, transliterations, and corporate structures

Q6: What are common challenges in sanctions screening?

• False positives due to name similarities
• Rapid list updates requiring real-time syncing
• Multi-language or non-Latin scripts (e.g., Arabic, Chinese, Cyrillic)
• Identifying indirect or beneficial ownership of sanctioned entities
• Ensuring group-wide consistency across global operations