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How to comply with new sanctions prompted by the conflict in Ukraine By Barley Laing, the UK Managing Director at Melissa

Barley Laing – UK Managing Director at Melissa

The invasion of Ukraine has resulted in a large number of new sanctions by many countries against leading politicians, businesspeople, and entities in both Russia and Belarus.

The UK has been one of a number of states leading the way in imposing sanctions, and as the fighting continues the number of those being sanctioned by the British government is increasing fast.

For those in the public sector, and in fact any sector, it’s not easy to keep up with the plethora of sanctions being announced – which they are legally required to adhere to.

The best way to ensure compliance with sanctions is by having access to sanctions lists, also called watchlists. For a long time these lists have played a vital role in ensuring those in the public sector effectively undertake know your customer (KYC) and anti-money laundering (AML) checks when onboarding people to use their services. The lists have also been used to run regular cross-checks against those on their existing databases.

Failing to properly assess for sanctions could see public sector organisations facing hefty fines. Also, they are likely to experience significant brand damage resulting from the negative publicity associated with providing services to someone who’s been sanctioned.

To ensure compliance with the new sanctions triggered by the conflict in Ukraine a best practice approach to KYC and AML is essential.

  • Source sanctions data from trusted global sources

The most important first step to ensure adherence with the latest sanctions data is to obtain an up-to-date sanctions list. Ideally, it’s accessed as part of an automated tool that collects and synthesises sanctions data from a wide range of trusted sources worldwide, such as governments, regulators, and credit agencies. It should also continually scan for updates and deliver them in real-time. This way it’s possible for the organisation to provide a smooth user experience for those signing up for services – something many people expect in the digital age. Taking an automated approach is also a much more efficient and accurate way to deliver sanctions checks. Undertaking manual checks, for example using search engines, could leave your organisation exposed to sanctions breaches and the associated cost in fines and to your reputation, quite apart for the large cost of employing staff to carry out such checks.

  • PEP screening

It’s not enough to solely have access to sanctions data. Organisations must obtain politically exposed persons (PEP) data from around the world as part of a wider best practice approach to sanctions checks, KYC and AML compliance. A PEP is defined as ‘an individual who is or has been entrusted with a prominent public function’ and it is ideal to screen for them in the early stages of any onboarding activity. Along with PEPs those in the public sector require access to details of relatives and close associates (RCAs) of PEPs, as well as those sanctioned. It’s because there is a tendency for these groups to be involved in or drawn into crime. In the UK, financial organisations have a legal requirement to undertake enhanced checks of both domestic and foreign PEPs.

  • Adverse media checks are vital
    Monitoring the latest news and alerts in real-time, not only for those facing sanctions, but also PEPs and anyone else who could have potential negative regulatory, financial, or reputational consequences to their organisation, is essential. Compliance teams must remain up to date on any new information regarding the status of those using their services. This requires organisations in the public sector to augment their standard sanctions and PEP screening process with checks on adverse media and negative news. These tools scan the global news media, sourcing information on those with new sanctions against them, and where legal cases are pending.
  • Sanctions training for compliance staff
    Suitable training and guidance must be provided for compliance staff who are on the front line when it comes to acting on the sanctions data. As well as having a clear understanding of the latest sanctions measures, they must know how to handle those individuals that are impacted by the sanctions.
  • Systems and controls
    Are your organisation’s onboarding and payment screening platforms able to act on those who have been sanctioned? And once these individuals have been detected in your database, do you have the systems in place to block transactions and quickly freeze funds? Identifying those who have been sanctioned is only half the battle. The next stage requires having processes in place to immediately act on this information.
  • Undertake a broader approach with automated identity verification

An automated tool that in real-time sources those on disparate sanctions lists, including PEPs and RCAs, works well as part of a more comprehensive approach to automated KYC and AML operations. This includes using electronic identity verification (eIDV) that can cross-check user-provided details against reputable data streams to ensure they are who they say they are in real-time. Additionally, when onboarding, implementing document scanning with optical character recognition (OCR) and machine readable zone (MRZ) technology enables those in the public sector to instantly and accurately determine the authenticity of the ID documents provided online. Because these operations are seamlessly integrated into the onboarding process, the user journey remains smooth and friction-free.

The large number of new sanctions prompted by the conflict in Ukraine highlights why the public sector must have access to continually updated real-time sanctions data, including data on PEPs and RCAs, from governments and regulators worldwide. With automated functionality, these lists can be easily used in conjunction with automated eIDV and document scanning technology for an accurate, quick, and cost-effective KYC and AML process.

For more information about Melissa and how our identity and document verification services can help you prevent fraud please visit: Melissa, email: barley.laing@melissa.com or call: 020 7718 0070.

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