5 Effective Ways to Identify Sanctioned Entities with Accuracy

Sanctions are the most powerful tool to cope with major ongoing financial crises. Many countries fail to comply with international regulations because of the existential gap in knowing ongoing regulatory updates. Every minute, if any country or individual is added to the sanctions list checks, another is removed. Organizations worldwide suffer from hefty fines due to their non-compliance with regulations about sanctions and PEP screening. 

One prominent case to discuss talks about US sanctions on Hamas-associated financial exchanges in Gaza. The United States has put a sanction on Iraqi airlines and other backers who are closely associated with military and intelligence units. Thus, we can assume that working with sanctioned entities and individuals can have far-reaching consequences. Your business may suffer from potential damages without being part of illicit behavior. These limitations are not restricted to legal consequences alone but rather further extend into financial and operational costs as well.  This blog will talk about 5 effective ways to identify sanctioned entities with accuracy by discussing the intensity of consequences it may have for your business.

Possible Consequences of Failure to Identify Sanctioned Entities

The adverse effects of working with or facilitating sanctioned entities are far more diverse than any of us can expect. While sanctions are just the aversive measure to avoid or complicate the flow of illicit activities, the after-effects of sanction implications are real. 

Legal Consequences:

Individuals and entities found working in collaboration with sanctioned entities are imposed with legal fines and repercussions which may extend toward criminal charges as well. This may also lead to imprisonment in case of serious charges.

Financial Penalties:

Corruption and money laundering are practiced to build upon wealth and financial assets. Working with sanctioned entities can freeze all your assets and funds associated with the sanctioned entity and others involved. This may also put you towards hefty cost compliance and mandatory obligations of conducting enhanced due diligence leading to increased cost of compliance and maintaining operational workflow of the business. 

Reputational Loss:

Apart from all other damages, reputation has the power to build or break your business suite. In today’s age when most of the communication and important aspects of business are reliant on digital mediums, reputation is also explored via digital mediums alone.  Negative publications instantly associate a doubtful and suspicious image further worsening the reputation. Having a significant understanding of the damages lack of sanctions list compliance and poor identification pose to the business, it’s high time to transform the way you run AML compliance and sanction list checks on clients' suspected partners, vendors, and many similar parties. Keep reading ahead to know all about it. 

5 Ways to Identify Sanctioned Entities with Accuracy 

If you are a small company wishing to expand its operational activity all across the globe or an international entity aiming to facilitate cross-border transactions, sanctions list compliance is crucial to abide by.  Businesses must maintain compliance with sanctions and AML regulations which span the sanctions put forth by OFAC, OFSI, EU, and other domestic and consolidated sanction lists. Confused about which sanctions to follow? Try using AML Watcher which simplifies the process for utmost ease and flexibility. 

Here’s how you can identify sanctioned entities better. 

1. Comprehensive Data Repository 

Regulatory bodies are consistently on the go to look for changes in global relationships. Companies face challenges in exploring the sanction updates. Using a database with global sanction coverage can help businesses stay updated with up-to-the-minute updates on sanctions that are being imposed and sanctions that are being lifted. 

1. Enhanced Due Diligence Measures 

Areas with a high potential for risk must maintain a higher level of security. Enhanced due diligence enables an in-depth insight into possible risk factors that may arise at any step of the customer partnership. 

This step also helps in understanding complex ownership structures and UBO's reputation by facilitating informed decision-making. 

1. Technological Advancements 

While every discussion in today’s age is about Artificial Intelligence and Machine Learning, there’s hardly any discussion that talks about real-time implementation of technological advancements. 

Pre-set sanctions screening technology, custom risk scoring, and simplifying search parameters are some of the many ways technology helps in keeping up with real-time sanction updates and abidance. 

1. Geopolitical Updates 

Important, but least talked about is a business’s willingness to stay compliant with ongoing geopolitical updates. The connection with these updates not only enhances the awareness of the global political landscape but also keeps one connected with investment opportunities, venture capital risks, and sanction updates. 

1. Internal Controls and Training 

The 2022, Wise Payment allowed for a $250 cash withdrawal from a business account owned by a person who just got sanctioned in Russia’s sanctions. Real-time risk monitoring and an updated database can help overcome identification challenges. 

Wrapping it up

Sanction penalties are real and must be avoided to keep up with evolving regulatory requirements. This blog offers significant insight about to-do’s and challenges that may happen otherwise.