Sanctions screening

What it means

Sanctions screening checks trading partners, their owners and officers against the sanctions lists of the EU, the UN and other jurisdictions. The aim is not to enter a relationship that is prohibited or restricted.

Sanctions are not only about names on a list. They extend to entities linked by ownership, to specific goods and technologies and to designated countries - so the chain is checked, not just the name on the invoice.

It is neither a creditworthiness check nor a check for politically exposed persons. Creditworthiness tells you whether a partner will pay, and political exposure is a reason for extra care; a person on a sanctions list means that no funds or economic resources may be made available to them, directly or indirectly.

How it works in practice

Screening happens before the relationship starts and then periodically, because the lists change. It is part of KYC and of AML duties, and in practice belongs to the same step as establishing the ultimate beneficial owner.

Cross-border trade adds checks on the goods and the destination. A dated record of the check performed belongs in the supplier audit file and evidences diligence in an inspection.

We advise clients trading outside the EU to build screening into the approval of each new partner, so that the dated result is stored on the customer record in the CRM. A name match is not yet a hit: for common names the date of birth, country or identification number is compared, and the assessment of a false match is recorded as well.

What to watch out for

Breaching sanctions has consequences regardless of intent and can mean frozen funds, fines and criminal liability. "Someone we know recommended them" is no defence - the burden of proof sits with the company and belongs to compliance.

A bank will not execute a payment to a sanctioned party and may hold the funds, so a company often learns of the problem only when a transfer is rejected. By then the goods have shipped and the money is frozen; paying in virtual currency does not reduce the risk, it just means nobody catches it for you.