Elements of Sanctions Screening

Programme

What are Financial Sanctions?

• Financial Sanctions are economic and trade restrictions imposed by governments and multinational
organisations against targeted countries, regimes, individuals and entities with the aim of effecting a change
in behaviour. These emanate from reasons related to national and international security, economy, or foreign
policy of the imposing nation or international body.
• All financial institutions have to fully understand their responsibilities and obligations from sanctions
perspective, not only towards their local jurisdiction regulator(s) but also the regulators/agencies in other
jurisdictions where they conduct business.

What is a Sanctions Screening Programme and why do you need it?

• A Sanctions Screening Programme is a combination of policies,
procedures and technologies that enable a financial institution to
ensure that it does not provide any form of services to sanctioned Non-
parties, directly or indirectly. sanctioned
• Although the regulatory bodies provide guidelines over the individuals/
Sanctions Programme as part of the AML / CTF procedures, the entities
recommendations are broad and at times, open to interpretation.
• A Sanctions Screening Programme is devised to carefully align
the Financial Institution’s policies, systems and controls to
regulatory guidelines and also combine them with contemporary
industry-wide best practices.
• The programme assists the Financial Institution (“FI”) in Potential
assessing, enhancing and optimising its Sanctions Screening Customers
Programme, thereby, enabling the FI to be compliant with the
measures imposed by relevant regulatory bodies. Policies Procedures Technology
• Sanctions screening is applied at various stages of customer
lifecycle:
• KYC and Customer Due Diligence checks – Information pertaining to the primary customer and associated
parties are captured and screened.
• Transaction screening – Transactions such as overseas remittances, trade finance, etc. are monitored for
screening beneficiary information.
• Periodic name screening – A change to either the customer information or watchlists1 provided by regulators
would trigger a delta screening process2.
• Adhoc name screening – Such screening is triggered to cater to a specific business need or for complying with
a request by the regulator/agency.

1
Watchlists are the lists of sanctioned individuals and entities that are periodically provided by the regulators
2
Delta Screening is the process of screening customer accounts whenever a change occurs in either the customer accounts or the watchlists used in the screening process
Key components of a Sanctions Screening Programme
An efficient Sanctions Screening Programme contains various components involving processes, people and technology. At the center
of these is the people aspect related to trainings and awareness.

The following diagram depicts these key components:

A comprehensive Sanctions Policy

Should cover all relevant regulatory requirements
1. Governance Should be lucid and easy-to-understand
and Control
An all-inclusive Alert Disposal Model Regular Periodic Reviews
process Well-designed KPIs to analyze
6. Disposal of 2. KPI based the various processes and
Workflow for escalation and
closing of alerts alerts and periodic controls of the Sanctions
escalations review Screening framework
Case Management and audit trail
Periodic Reviews and transparent
Reporting to authorities management reporting
7. Staff Awareness
A detailed methodology for and Training A sacrosanct Dataset
Investigations Data capturing should be
5. Alert
Should cover all aspects of 3. Effective consistent and adequate
Investigation
investigations including search Data Data flow from various systems
Methodology should be unhindered
criteria and technology to
support the same 4. Technology Data sanctity to be preserved
Framework
A robust Screening Platform and Lists
Management
Screening against various watchlists. Should be
interfaced with key systems containing static data
How to ensure that your technology supports an effective Sanctions Screening
Programme?
One of the key components of a successful Sanctions Screening Program is a strong technology framework that can
process data quickly and efficiently, employ an efficient and effective matching algorithm, and possess a clear audit
trail of observations and resolutions.

Setting up the technology platform

• Identify applicable Sanctions lists
• Identify data sources – Identify various data sources of customer information, relevant
transaction information, and sanctions list.
• Build CDM – Common Data Model should comprise all the attributes that would be used
in the screening process.
• Define roles, responsibilities, interfaces and access – Map users and departments with
roles and access rights to the platform. Map interfacing applications and the type of access
they should have to the screening platform.
• Configure Sanctions screening engine – Optimise matching quality by setting
thresholds, use of right fuzzy match technique, transliteration options, etc.
• Test the platform
• Feedback and Go Live – Resolve the issues identified in the testing phase. Go Live and
monitor the
performance regularly.
Key success factors
• Appropriate data should be collected and consistent data formats maintained
• Multiple versions of customer and related party records should be maintained
• Applicable watch lists should be kept current
• All indicia in the watch lists should be utilised in the Sanctions Screening process
• Matching algorithms should consider multiple parameters
• Alerts should be risk rated or prioritised
• Methodology for alert escalation and disposal should be clearly defined
• Case management feature
• Ability for ad hoc screening
• Customisable KPI reports
• A strong Business Continuity Plan
What to do before initiating the programme?
Financial Institutions across the world face several challenges in implementing a robust Sanctions Screening Programme. These
challenges range from technological / systemic to organisational / cultural. Hence, prior to initiating the programme, a Financial
Institution can choose to perform certain activities to understand the current state of affairs; this would also help the organisation
in chalking out a comprehensive roadmap for a full-scale Sanctions Screening Programme.

Lack of a clear view of Lack of training Non-standard

the type of products, and awareness datasets, diverse
systems, and data of sanctions data sources, and
sources compliance poor data quality

Absence of a robust Absence of

Challenges

Gaps between hierarchy and lack of clear thought on Inadequate

evolving regulations preset roles and implementation and technology
and existing policy authorities what is needed infrastructure

1 2 3 4 5 6 7
Solutions

Sanctions Stakeholder Requirement Technology

Policy Analysis gathering upgrade

Product system Training and Data cleansing

matrix awareness and lineage

The FI may choose to address these challenges in a number of ways. One way is to create a priority matrix and implementation
parameterisation to decide on which aspects of the above challenges can be tackled first:

7
effective
Highly

2 6

3 Milestone Priority
Effectiveness

Sanctions Policy 1
quotient

5 1
Product System Matrix 2
4 Stakeholder Analysis 3
less effective

Requirements Gathering 3
Relatively

Data Cleaning and Lineage 1

Less complex Highly complex Technology Upgrade 4

Quick to implement Takes a long time to implement
Training and Awareness 5
Complexity and time
taken for implementation

With contributions from Kartik Venkata, Assistant Manager, Forensic Services.

Contact Us
Dhruv Chawla Dhritimaan Shukla
Partner, Forensic Services Director, Forensic Services
M: +91 8130166550 M: +91 9899038326
E: [email protected] E: [email protected]

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