Sanctions screening system testing explained
What is sanctions screening system testing?
Sanctions screening system testing is the independent, evidence-based assessment that verifies whether a firm’s screening technology operates effectively, efficiently, and as intended.
Unlike a basic system audit, testing examines how sanctions lists, matching logic, thresholds, configurations, and data interact in practice. It challenges the system using both standard and manipulated sanctions records to assess real-world detection capabilities.
Key areas of evaluation include:
- Fuzzy matching
- Thresholds, rules, and configuration settings
- Sanctions list management processes and updates
- The system’s ability to screen against all relevant sanctions record types, including individuals and entities as well as, where applicable, BICs, vessels, aircraft, maritime-related records, network-based exposure, and digital-asset-linked sanctions.
In 2026, regulators increasingly consider sanctions screening testing a critical activity, providing objective evidence that controls are effective, explainable, and aligned with an institution’s documented sanctions risk appetite.
Why regulators now require testing and validation
Regulators no longer accept the existence of sanctions controls as evidence of compliance.
Enforcement actions repeatedly reveal breaches caused by:
- Misconfigured systems
- Weak governance and oversight
- Ineffective use of screening technology
As a result, supervisory expectations now include:
- Regular, independent testing of sanctions screening systems
- Validation following regulatory updates, system changes or remediation
- Demonstrable effectiveness across products, channels, and jurisdictions
These expectations are reinforced by FATF standards and the EBA’s 2024 Money Laundering Guidelines, which emphasise the need for ongoing testing, tuning, and validation of sanctions screening frameworks.
Effectiveness vs efficiency: Understanding the regulatory distinction
Regulators expect firms to demonstrate control over both effectiveness and efficiency:
- Effectiveness: The system’s ability to detect sanctioned parties, including aliases, transliterations and manipulated data.
- Efficiency: Achieving detection without excessive false positives that undermine review quality and inflate compliance costs.
High alert volumes alone do not demonstrate strong controls. Regulators increasingly challenge firms whose tuning decisions prioritise operational convenience over documented sanctions risk assessments. Independent testing provides objective insight into whether this balance is achieved.
Explainability: Demonstrating how screening decisions are made
Explainability is now a central supervisory expectation.
Firms are expected to clearly demonstrate:
- How screening rules, thresholds, and matching logic function
- Why alerts are generated or suppressed
- How configuration and tuning decisions align with risk appetite and governance approvals
AMLA®’s independent testing has repeatedly found that even when sanctions controls exist, many firms cannot clearly evidence or explain system outcomes. Testing provides documented insight into system behaviour, configuration rationale, and performance outcomes that can be confidently communicated to regulators and senior management.
The role of independent validation in sanctions compliance
Independent validation provides objective assurance that sanctions screening systems are fit for purpose. Regulators increasingly expect testing to be conducted independently from system vendors, internal IT teams, and first-line operations, enhancing credibility and reducing conflicts of interest.
Independent testing enables firms to:
- Identify hidden configuration weaknesses
- Validate remediation effectiveness
- Benchmark performance against peers and regulatory expectations
In today’s regulatory environment, independent validation is no longer optional, it is a core component of defensible sanctions governance.
Common sanctions screening failures identified through testing
Independent testing consistently identifies recurring weaknesses, including:
- Poorly calibrated systems
- Limited understanding of system logic and limitations
- Weak list management and delayed updates
- Inadequate testing of manipulated data
- Excessive false positives driven by poor tuning
- Weak change management and lack of regression testing
These issues frequently underpin regulatory findings, remediation programmes and enforcement actions, even where breaches were unintentional.
Supporting regulatory compliance through independent sanctions screening testing
Independent sanctions screening testing provides regulator-ready evidence that controls are effective, explainable and aligned to risk.
AMLA® provides vendor-neutral, independent assurance for sanctions screening systems, supporting banks, insurers, crypto firms, DNFBPs, and regulators across nearly 60 countries. Our testing confirms that sanctions screening controls operate as intended in practice, not just in policy or design.
Independent sanctions screening testing with AMLA® enables institutions to:
- Demonstrate compliance in alignment with FATF standards, the EBA’s Money Laundering Guidelines, and national sanctions regimes.
- Provide credible, regulator-ready assurance to supervisors, auditors, and senior management.
- Reduce exposure to enforcement action, remediation programmes, and operational inefficiency.
- Support continuous improvement through data-driven tuning, benchmarking, and ongoing validation.
In an environment of heightened enforcement and increasingly sophisticated sanctions evasion, independent, vendor-neutral testing is essential to maintaining resilient, defensible sanctions compliance.
Speak to the AMLA® team today to discuss your sanctions screening testing requirements, find out about our solutions, or book a demo of our testing and analytics capabilities.