A sanctions list contains individuals, organisations, countries, BICs, vessels and aircraft that are subject to economic penalties that have been issued by international governments or political and economic unions.

Sanctions are a tool used by countries or international organisations to persuade a particular government or group of governments to change their policy by restricting trade, investment or other commercial activity. For example, they may be applied by countries which develop weapons of mass destruction, violate human rights or trade unfairly. The extent of these sanctions often depends on the severity of the violation.

Economic sanctions are punitive in nature and meant to isolate the target. Economic sanctions may include trade embargoes or boycotts, freezing of assets, bans on cash transfers, bans on technology transfer and restrictions on travel. It should be noted that certain sanctions are applicable even if the company does not operate in a particular jurisdiction.

There are a number of sanctions lists that are maintained by different countries and international organisations around the world. The exact number can actually vary, but here are some of the key ones worth noting and who maintains them:

1. United Nations Security Council (UNSC) Sanctions List – Covers individuals, entities, and countries sanctioned by the UN for threats to international peace and security.
2. United States (OFAC) Sanctions Lists – The U.S. Treasury’s Office of Foreign Assets Control (OFAC), including: Specially Designated Nationals (SDN) List, Sectoral Sanctions Identifications (SSI) List and the Foreign Sanctions Evaders (FSE) List
3. European Union (EU) Consolidated Sanctions List – Enforces economic and trade restrictions against individuals, entities, and countries.
4. United Kingdom (UK) Sanctions List – The UK’s Office of Financial Sanctions Implementation (OFSI).
5. Canada’s Sanctions List –Canadian government under the Special Economic Measures Act (SEMA).
6. Australia’s Consolidated Sanctions List – The Department of Foreign Affairs and Trade (DFAT).
7. Switzerland’s Sanctions List – The State Secretariat for Economic Affairs (SECO).

How often a sanctions list is updated varies from list to list. Some sanctions lists are being added to as regularly as daily, while others might be added to less frequently. The frequency can change depending on global events, too.

Being aware of when sanctions lists have changed is crucial when it comes to sanction screening testing. If tests are created with out-of-date sanctions lists, the system being tested won’t be screening against up-to-date sanctioned records.

You can subscribe to our free solution, Sanctions Alert Service, to receive notifications in real time whenever a change is made to a globally important list. 

A sanction screening system acts like an ongoing monitoring filter against sanctioned records and politically exposed persons (PEPs), ensuring none “slip through the net” and breach mandatory customer due diligence processes and international sanctions regulations.

Regulated businesses, such as banks, implement sanction screening systems to comply with regulations and prevent money laundering and to combat the financing of terrorism, also known as AML/CFT.  

An asset freeze prevents any UK citizen, or any business in the UK, from dealing with any funds or economic resources which are owned, held, or controlled by the designated person. 

If sanction screening systems are not tested regularly, financial institutions will not know if they are functioning optimally, and alerting against sanctioned records and PEP sources.

All sanction screening systems have “out-of-the-box” settings that are often not up to the standards required, so by testing them, a better understanding can be achieved as to the required risk appetite by each individual financial institution, and the system can be tuned accordingly, to be both effective and efficient.

Failing to regularly test and appropriately tune a sanction screening system can leave financial institutions open to strict regulatory punishment, such as fines, cease of trade and in some circumstances, prison sentences.

Transaction monitoring in AML terms means to monitor a customer’s transactions (transfers, deposits and withdrawals).

A transaction monitoring system will aim to alert against suspicious behaviour (red flags) which could suggest types of financial crime occurring, such as money laundering, human trafficking or the illegal wildlife trade (IWT). It also helps to ensure adherence to anti-money laundering regulations by flagging potentially illicit activities. 

Red flags are created from the knowledge and understanding of patterns that emerge from the analysis of criminal transactional activity. They are then defined according to regulation and guidance notes and assigned to a specific financial crime typology, such as the illegal wildlife trade or human trafficking.

Testing a transaction monitoring system ensures it is capable of detecting criminal and suspicious activity and is done so using typologies of certain types of criminal activity, such as money laundering or human trafficking. Therefore, if these crimes were to take place in the real world, financial institutions’ systems would be able to detect them, helping they stay compliant whilst also catching criminals in the act.

Banks, investment firms, life assurance companies and collective investment firms are among the types of organisations who carry out transaction monitoring.

A control dataset is made up of names taken from sanctions lists or politically exposed person (PEP) sources. These names are provided for testing without any changes being made to them. Testing ensures a sanction screening system can match a name in its pure form.

A manipulated dataset is a set of names taken from sanctions lists or PEP sources, but changes are made to them to test the fuzzy logic matching capabilities of a screening system.

Both of these datasets are included within our test files for rigorous testing of a sanction screening system.