Understanding the importance of sanctions screening

Working within an organization or business inevitably means that you have to work together with external people or companies. It is of vital importance that you are aware of the risks of these engagements, especially when you work within the field of export. With sanctions screening, you identify individuals, entities or transactions that are subject to economic sanctions imposed by governments or other regulatory institutions. In this article, we’ll delve into the specifics of sanctions screening, the European Union (EU) sanctions regime and the sanctions screening process, with a focus on export control sanctions.
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What are sanctions?

Sanctions are restrictive measures imposed by governments or other international regulatory organizations. These are aimed at individuals, organizations or countries when certain actions are deemed unacceptable or unlawful. Sanctions are used to make sure everyone is complying with (international) law and human rights standards.

What is sanctions screening?

The most important purpose of sanctions screening is to ensure compliance from your partners with relevant laws and regulations concerning international trade, finance and security. This gives you and your organization the opportunity to identify potential violations before they happen. Sanction checks involve comparing information with databases of sanctioned parties, which are usually provided by the government.

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Our solution pillars

We offer a unique Export Control & Compliance program, called the “A4 approach”. The A4 aproach, combines solid compliance structure with Lean Six Sigma / Lean Thinking techniques. Why? Because it is simple, easy to understand and a perfect base to find the compliance starting point withing your organization

Aware

Most companies are not aware of sanctions & export control regulations. We create awareness by straight forward, to-the-point training.
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Assess

What is the maturity of your sanction & export control compliance? We have developed a lean compliance assesment tool called SCAN365.
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Adapt

Now you’re aware of the gaps in your compliance process, fixing them is the next challenge. Translating the gaps in your processes into solid solutions.
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Assist

Outside assistance and coaching will keep you sharp. Because you can’t know everything in the volatile domains of sanctions & export controls.

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The EU sanctions regime

Just like national governments, the European Union also has an extensive sanctions regime. The EU uses sanctions to make sure the goals of the Common Foreign and Security Policy (CFSP) are endorsed. EU sanctions are not pointed towards specific countries but only at specific policies or activities. These are regularly under review by the Council of the EU who decides if certain sanctions should be renewed or amended. The majority of sanctions imposed by the EU consist of a freeze of assets and travel bans, but they could also take economic measures. The EU sanctions regime is therefore a valuable source to use within your sanctions screening tools to find out whether an individual or organization is safe to do business with.

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The sanctions screening process explained

A sanctions screening process is an approach to identify sanctions imposed against certain individuals or organizations. It is usually used to make sure a (new) partner is not part of any restrictive measures so organizations can reduce the risk of sanctions violations. Usually, the process includes these steps:

  • The first step of the sanctions screening process is to gather as much information as possible about a new partner or collaborative organization. Think about data regarding customers, partners and transactions. 

 

  • After collecting this information, it is compared against sanction databases. For example by studying the EU sanctions regime. 

 

  • If a match is found, it is important to further analyze the information. Not all matches are a definitive sanctions violation, and it is crucial to be sure of the data. Sanctions screening services are available to assist in the assessment of the match.

 

  • It is crucial to keep detailed records of the sanctions screening activities. Besides that, sanctions screening is an ongoing process. It is therefore important to keep monitoring changes within sanctions lists and regimes.

Sanctions screening data suppliers for small businesses

Where do you gain insights in the sanction violations of different partners? There are a number of big sanctions data suppliers. Two of the biggest ones are Dow Jones and London Stock Exchange (previously Refinitiv). Their data makes sure you can find out in great detail whether a business or person should be avoided as a partner, or whether an organization is managed by wrong people. These tools are quite expensive, and small businesses can usually never afford them because of the high volumes they have to purchase. However, Export Control Group has a partnership agreement with Dow Jones to offer individual transactions. This is an arrangement specifically for small businesses and will be available in short notice.

Sanction screening requirements within export control

The international export of goods and services is a field where governmental sanctions play a big role. You have to make sure you are not exporting to countries or organizations that are part of import or export restrictions. If you are not complying with export control sanctions and regulations, you are at risk of high fines or even (temporary) export bans. A lot of organizations are not even aware of the fact that they have to keep up with sanction checks. This is therefore the first step within the process of export compliance, among three others. We call this the A4 approach:

  1. Aware: create awareness about sanctions and export control regulations within all levels of your organization. This is an ongoing process, as rules and regulations are always changing.
  2. Assess: determine the state of your organization with risk assessment. 
  3. Adapt: adjust your organization and management to make sure you are complying with all relevant rules and regulations. 
  4. Assist: it can be challenging to maintain your level of compliance, especially since laws are subject to change. Sanction screening services could help you stay alert. 
Read more about the A4-approach

Get your sanctions screening under control

As you have read, there are a lot of important elements when it comes to the sanctions screening process. You have to make sure your organization is complying with all relevant laws, and that you are not working together with individuals or businesses that are subject to sanctions. Especially if you are exporting goods, information or services across national borders. Our export control experts can help you with this process and have experience in all different types of sectors. Do not hesitate to contact us for more information.

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