Sanctions screening
What is sanctions screening?
Sanctions screening is the process of verifying that individuals, companies, and entities involved in a business transaction are not subject to any trade or economic sanctions imposed by governments or international organizations. This process is essential to ensure compliance with legal and regulatory requirements and to avoid engaging in prohibited activities.
Why is sanctions screening important?
Sanctions screening is crucial for several reasons. Firstly, it helps businesses comply with international laws and regulations, avoiding significant fines, legal penalties, and reputational damage. Secondly, it ensures that companies do not inadvertently support criminal activities, terrorism, or regimes that violate human rights. By conducting sanctions screening, businesses also protect their supply chains from disruptions caused by penalties or asset freezes.
When must sanctions screening be conducted?
Sanctions screening should be conducted at various stages of the business relationship. This includes the onboarding of new customers, suppliers, or partners, and during regular reviews of existing relationships. It is also essential to perform screening before any significant financial transaction, shipment, or contract agreement. Regular and ongoing screening helps identify any changes in the sanctions status of entities with whom a company is already doing business.
How to do sanctions screening
To conduct sanctions screening, companies typically use specialized software or third-party services that provide access to updated sanctions lists from various authorities, such as the United Nations, the European Union, and the Office of Foreign Assets Control (OFAC) in the United States. The screening process involves comparing the names and other identifying information of business partners against these lists. Any potential matches require further investigation and, if necessary, action to ensure compliance. Maintaining detailed records of the screening process and any decisions made is also a best practice for demonstrating compliance during audits or investigations.