Data management: Why it matters for effective sanctions screening

Sanctions screening

Sanctions play an important role in the global fight against financial crime. Governments and institutions such as the UN, OFAC and the EU issue sanctions and restrictions, directed at states, individuals or legal entities that are involved, or suspected of being involved, in illegal activities. Financial institutions are required by regulations to search through their client databases and transaction flows in order to detect any potential violations.

They must therefore implement suitable screening programs to comply with the applicable sanctions regulations. There is no ’one size fits all’ solution for sanctions screening that is appropriate for all institutions. Rather, the design and dimensions of a sanctions compliance program will depend on factors such as the nature of the business or the jurisdictions in which they operate.

Importance of establishing a data management cycle for sanctions screening

Typically, sanctions screening uses both internal and external data sources. An organisation’s internal data on customers and transactions is compared to external data from sanctions lists and other indicators of sanctioned parties. Screening internal data against relevant sanction lists can be a challenge, due to the large volumes of client and transaction data that financial institutions process on a daily basis. A data management process needs to be updated regularly for relevance and accuracy, to enable institutions to maintain an efficient and effective screening process. Difficulties that financial institutions may need to address include the unification of lists, different writing systems and regional naming conventions, poor data management, and manual data processes, as well as non-integrated IT systems.

Potential solution and benefits

Regulators from all over the world emphasise the importance for financial institutions of implementing new technologies to enhance their AML compliance programs in order to combat financial crime. Automation can speed up the sanctions screening process by completing data collection, analysis and compliance checks faster and with greater reliability, improving the quality and completeness of the screened data. This will help financial institutions to meet their regulatory requirements while also reducing the amount of manual work, which is costly and prone to errors.

Sanctions screening trends

Increasing data volumes and ever-changing sanctions regulations have increased the need for automated processing and cataloguing of data in real time for screening purposes.  Trends in recent years within large institutions have been towards a more holistic approach to compliance – including sanctions screening – and more extensive use of available data.