6 Aspects of the Sanctions Compliance Program

For a business, it is very important to work according to regulations and following international standards. An important part of complying is sticking to sanctions that are put by the governmental bodies and authorities. A strong Sanctions Compliance Program (SCP) is important for businesses so they can eliminate risks and maintain the standards while running their day to day operations.

A Sanctions Compliance Program (SCP) is a well-designed structure made by the companies to make sure that they do not violate any sanctions regulations. This program is all about implementing strategies and controls so businesses do not engage with people or businesses that are sanctioned in even other countries. An effective SCP is important for protecting an organization’s reputation so they can protect themselves from being fined by authorities.

According to a report given out by the Atlantic Council, the number of sanctions programs and number of people and businesses on the sanctions list is increasing with time and as of March 2023, it has gone above 10,000 people and around 300 programs worldwide. 

Sanctions list screening or sanctions checks are an extremely important part of a SCP. It is all about checking customers and suppliers, as well as information about transactions against the sanctions list. This helps in making sure that there are no matches. Sanctions screening solutions automate the processes and allow businesses to perform the checks more smoothly.  

Sanctions screening solutions have a very important part in increasing the effectiveness of a Sanctions Compliance Program. These solutions make use of advanced algorithms and various databases which help them cross-check data against the sanctions lists. This helps in identifying and preventing risks in real time.

Important Components of a Sanctions Compliance Program

  1. Policy Development: The SCP lays out clear and easy to understand policies that outline the importance of a company’s commitment to sanctions compliance and the outcome of not doing so. 
  2. Risk Assessment: Recognizing and evaluating the risks that come with the activities of the business. This includes its relationship with its customers, location and type of transactions.
  3. Training and Awareness: An important part of the SCP is training and educating the workers in companies about the sanctions guidelines and the importance of complying with them.
  4. Sanctions Screening Procedures: Using powerful techniques and procedures for performing sanctions screening at different phases of the client lifecycle and transaction processing.
  5. Ongoing Monitoring and Review: SCP also includes constantly monitoring and looking into sanctions screening processes to see areas that require improvement.
  6. Escalation and Reporting Mechanisms: Laying out ways in which the violation of sanctions can be reported to the authorities and higher management. 

Case of the French Bank Fined for Sanctions Violations

In the year 2014, the US Department of Justice (DOJ) and the New York State Department of Financial Services (NYDFS) fined a French bank around $9 billion for planning to violate the IEEPA, International Emergency Economic Powers Act and the TWEA, Trading with the Enemy Act. These acts are US regulations that do not allow American businesses and people from dealing with the transactions of countries and people that are sanctioned. 

The investigation into the case showed that the bank allowed billions of dollars in exchanges for entities in Iran, Sudan, and Cuba, regardless of US sanctions restricting such movement. It hid the transactions by using different techniques, for example, stripping identifying data from wire transfers and moving them through different FIs. Moreover, it did not carry out internal controls to forestall and identify such violations. 

The fine imposed on the bank was the biggest ever imposed by the US government for violating the sanctions. This case also sent a message to the global financial world that the sanctions are supposed to be respected and that their violation can lead to bad outcomes. The French bank faced damage to its reputation which also affected many of its business opportunities. 

How Can the Sanctions Compliance Program Help You?

A well designed Sanctions Compliance Program is important for businesses and financial institutions as it can help them follow the sanction guidelines. With the help of sanctions screening solutions and by following the industry‚Äôs best practices, businesses can get rid of risks and keep their reputation strong. 

So, put a stop to the wait and find out more about SCP at AML Watcher. You must comply now for a better and safer future for your company. 

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