Tag Archives: sanctions

Immediate Vault

Managing Sanctions Risk from Russia’s War on Ukraine

Posted on by

Since Russia began attacking Ukraine on February 24, thousands of people have been killed and over a million people have had to flee their homes, presenting one of the largest refugee crises Europe has ever experienced. In addition to the tragic human losses, the Russian invasion of Ukraine has triggered wide-ranging economic impacts. Among them, the European Union, United Kingdom, United States, Canada, Japan and others have enacted sweeping financial sanctions on Russia in an effort to pressure President Vladimir Putin to end the conflict. These sanctions have targeted Russia’s financial system and its international financial connections by restricting transactions between Russian banks and those in other countries, most notably through the SWIFT global financial network.

The economic impacts of these sanctions will likely affect many industries around the world, whether organizations deal with Russia directly or indirectly through third countries. In a briefing yesterday, global risk consultancy Control Risks discussed some of the risk management considerations and steps companies need to take as the sanctions landscape continues to evolve. According to panelist Henry Smith, partner and head of business intelligence and due diligence in EMEA at Control Risks, there are five key areas risk professionals should focus on to address the risk facing their companies as a result of these sanctions:

  1. What are your nexuses to Russia (including outside Russia)? Organizations need to look at their touchpoints with Russia, including investors and shareholders, lenders and banks, direct and indirect clients, contractual counterparties, and goods and services sourced directly or indirectly from Russia.
  2. Which sanctions apply to your organization?
    online pharmacy azithromycin with best prices today in the USA

    The applicability of sanctions will vary based on your sector, the nationality of the people within the organization, and the currencies you use. It is helpful to note that, currently, there is greater consensus among various sanctions regimes so you may not have to parse through conflicting degrees of severity—consistent sanctions against Russia are being imposed, at least across most Western countries.
  3. What risks are you exposed to? Conduct a risk assessment around which sanctions you are exposed to and whether there are any business activities, relationships or practices you need to end or change in some way. This involves regularly screening Russian counterparties against sanctions lists and undertaking detailed analysis of higher-risk relationships.
  4. How do you respond? Review the implications of any decisions on employees and on contractual obligations, both with direct and third-party clients. Consider any impact winding down activities in one area may have on other business areas. Be sure to engage with regulators, enforcement agencies, banks and insurers for guidance.
    online pharmacy periactin with best prices today in the USA

  5. What do you do as sanctions regimes evolve? Sanctions will change in response to security and political developments over the coming weeks and months, so it is important to stay informed of any communications from authorities.
    online pharmacy reglan with best prices today in the USA

    Review and read guidance from regulators, enforcement agencies, banks and insurers, and benchmark with industry peers to make sure you can still operate effectively.

Overall, when deciding whether to continue doing business with Russia, companies will need to consider both reputational and ESG-based perspectives as well as practical issues around your ability to do business, such as maintaining the working capital required to continue operations and ensuring that goods and services can still move through the supply chain.

Experts expect that the Russia-Ukraine crisis will have a long-term impact on the global economy and many effects of these sanctions may not be felt for weeks or months. Companies will need to remain vigilant in order to stay ahead of the risks.

Reducing Risk Exposure Through Sanctions Screening

Posted on by

International sanctions have increased in recent years and discrepancies still exist between how financial institutions and non-banking financial institutions in different countries and regions handle them. This has led to ongoing international tensions where politicians use asset-freezing, confiscation and other sanctions as tools to forward personal agendas, producing an increased stream of sanctions. It also leads to headaches for the compliance industry as it attempts to assess their level of risk.

For example, there is a great sanction application difference between the United States and the European Union/United Kingdom as a result of the United States leaving the Joint Comprehensive Plan of Action (JPCOA) agreement and re-implementing sanctions against Iran progressively in 2018. In a post-Brexit world, it is likely that a divergence between European Union and United Kingdom sanctions will occur over time.

Increasing challenges add to complexity for compliance professionals conducting sanctions and transactions screenings in accordance with regulations and institutions’ policies. The rapid transition to an increasingly digital world amidst COVID-19 begs the question: Do financial institutions truly understand the identities moving within their digital networks?

The Wolfsberg Group recently published detailed guidance for financial institutions regarding sanctions screening. The guidance highlights the importance of account and transaction screenings, but does not propose fundamental changes to the processes that financial institutions should follow already. Compliance officers need to rely on robust sanctions screening systems, high data quality and up-to-date policies to drive a successful long-term sanctions screening program.

Compliance departments should continue to conduct basic functions such as documented controls and procedures. They should also require a clear understanding of sanctions risk and how essential it is to take a risk-based approach to customer onboarding. Further, the compliance team should consider improving the following:

  1. Sanctions List Management: List data can be incomplete and decay over time. Active list management is essential for compliance personnel to ensure complete, accurate and up-to-date data.
  2. Screening Technology: Screening engines vary in capability. Platforms should meet business needs on a basic level and be able to:
    • Manage requisite screening record volumes
    • Configure to reflect the differing risk profile lists
    • Efficiently remediate alerts through fully functioning workflow tools
    • Ingest a variety of external lists
    • Integrate APIs into enterprise systems
  3. Sanctions Data: Not all externally provided sanctions lists are created equal. Financial institutions should conduct thorough due diligence and compare data from different sources. Some issues to consider:
    • How the data is synthesized from original issuing bodies
    • The quality controls within the research process
    • The extent that the provider enriches the data to maximize secondary identifiers of sanctioned individuals
    • How complete the data set is, given the many official bodies globally and whether the system is configurable to select those relevant to the institution in question
    • Whether the data provided facilitates consolidation of entities appearing on multiple sanctions lists to lower duplicate alerts and minimize analysts’ efforts

Sanctions screening is a vital but complex process and a continuously trained compliance staff helps ensure that the financial institution is consistently screening against the most relevant and up-to-date sanctions lists. Sanctions authorities require increasingly strict compliance and this involves employing intelligent augmentation through a combination of human efforts and new technologies such as big data, data analytics, machine learning and artificial intelligence.

Organizations can best reduce risk exposure by using all the compliance tools in a responsible and efficient way. Only then can a financial institution be sure that it is navigating the increasingly complex and rigorously enforced regulatory landscape.