Sanctions management is key

The sanctions against Russia have introduced one of the largest changes to sanction lists in recent years and have far-reaching implications for firms across the globe. In fact, according to data service Statista, more than 10,500 restrictions have been imposed on Russian firms and individuals since the invasion of Ukraine. More than 7,500 of those were implemented during the last five months. This requires comprehensive reviews of regulated firms’ risk appetites and the processes and controls that manage their businesses within acceptable tolerance levels.

Scale and scope Sanctions management is a key requirement for all financial services firms as well as for many other industries which are regulated for anti-money laundering (AML). However, whilst it is true that sanction lists change frequently, the scale and scope of the recent changes is significantly larger than normal. Such an extensive set of changes to sanction lists will most likely generate some genuine new positive sanction hits and firms with wider Russian dealings are feeling the pressure. Furthermore, not all countries sanction the same entities/individuals/vessels at the same time which could severely complicate matters for multinational firms. Volume-wise though, it is the number of false-positives (near matches) that are most obvious as matching systems flag possible sanction matches that turn out to be incorrect following (typical) human analysis.

Firms that have highly automated screening processes, possibly using artificial intelligence (AI), could be in a better position to manage the spike in work compared to those where these processes are more manual. The spike in work will be transitory since most sanction systems “remember” previous mitigation work and don’t re-flag the same false positive twice but sanction lists were updated quite a lot in recent months.  That said, the work of investigating and mitigating, both genuine positives and false positives, can be substantial in some firms, depending on their customer-base.

Expert intervention The Lysis group can make a real difference by providing a managed service platform for initial screening and on-going monitoring requirements or by providing managed teams to execute this work on our clients’ platforms. All our staff are experienced in AML, Know Your Client (KYC) and other financial crime requirements. Using industry leading software partners, Lysis can also screen legal entities and individuals against all global watch lists and sanction lists, either in bulk or individually. Our analysts will review all potential hits and thoroughly document whether there are any true or false hits. Any positive hit will be escalated to the client in an agreed format and timeline, but all discounted and positive hits will go through a rigorous quality assurance review. To add to clients’ peace of mind, screening can be carried out as often as required, including daily, weekly, or monthly batch screening. All entities and individuals will be screened automatically as soon as international watch lists or sanction lists are updated.

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