Designing and Implementing a Sanctions Compliance Program
Expert-defined terms from the Advanced Certificate in Sanctions and Trade Embargoes in International Business course at London School of Business and Administration. Free to read, free to share, paired with a globally recognised certification pathway.
**Adverse Media** #
**Adverse Media**
Adverse media refers to negative news or articles about a person or an entity fo… #
Sanctions compliance programs may use adverse media to identify and assess the risk posed by customers, vendors, or other business partners. Adverse media can indicate involvement in illegal activities, such as money laundering, terrorism financing, or corruption. Sanctions screening tools can help identify adverse media related to a specific person or entity.
**Automated Sanctions Screening** #
**Automated Sanctions Screening**
Automated sanctions screening is the process of using software to compare a list… #
The software automates the process of identifying matches and flagging them for further review. Automated sanctions screening can help ensure compliance with international sanctions regulations and reduce the risk of financial penalties and reputational damage. The software can be integrated with other systems, such as customer relationship management (CRM) or enterprise resource planning (ERP) systems, to streamline the sanctions compliance process.
**Beneficial Ownership** #
**Beneficial Ownership**
Beneficial ownership refers to the person or entity that ultimately owns or cont… #
Determining beneficial ownership is an important part of customer due diligence (CDD) and Know Your Customer (KYC) processes, as it can help identify potential risks and ensure compliance with sanctions regulations. The ultimate beneficial owner (UBO) is the person or entity that holds more than 25% of the company's shares or voting rights, or exercises significant control over the company. Sanctions regulations may require financial institutions and other regulated entities to identify and verify the beneficial ownership of their customers.
**Compliance Culture** #
**Compliance Culture**
**Designated Nationals** #
**Designated Nationals**
Designated nationals are individuals or entities that have been designated by th… #
S. government as being subject to economic sanctions. Specially Designated Nationals (SDNs) are a type of designated national that are subject to comprehensive sanctions, meaning that all property and interests in property of the SDN are blocked, and U.S. persons are generally prohibited from dealing with them. The Office of Foreign Assets Control (OFAC) maintains a list of designated nationals, which is updated regularly. Financial institutions and other regulated entities are required to screen their customers and transactions against the sanctions list to ensure compliance with U.S. sanctions regulations.
**Due Diligence** #
**Due Diligence**
Due diligence is the process of conducting a thorough investigation and assessme… #
Customer due diligence (CDD) and Know Your Customer (KYC) processes are types of due diligence that are used to identify and verify the identity of customers and assess their risk profile. Enhanced due diligence (EDD) is a more detailed and rigorous form of due diligence that is used for higher-risk customers or transactions. Due diligence is an important part of sanctions compliance, as it can help identify and mitigate potential risks and prevent violations of sanctions regulations.
**Economic Sanctions** #
**Economic Sanctions**
Economic sanctions are measures taken by governments or international organizati… #
Economic sanctions can take various forms, such as trade embargoes, financial sanctions, or restrictions on travel or immigration. The goal of economic sanctions is to change the behavior of the targeted country, person, or entity by imposing costs and limiting access to resources. Sanctions compliance programs are designed to ensure compliance with economic sanctions regulations and prevent financial penalties and reputational damage.
**False Negative** #
**False Negative**
A false negative is a type of error that occurs when a sanctions screening or na… #
False negatives can occur due to various factors, such as spelling errors, name variations, or incomplete information. False negatives can result in the processing of transactions that violate sanctions regulations, and can expose financial institutions and other regulated entities to financial penalties and reputational damage.
**False Positive** #
**False Positive**
A false positive is a type of error that occurs when a sanctions screening or na… #
False positives can occur due to various factors, such as name similarities, common names, or inaccurate information. False positives can result in additional review and investigation, and can cause delays and inefficiencies in the sanctions compliance process.
**Geographic Targeting Orders (GTOs)** #
**Geographic Targeting Orders (GTOs)**
Geographic Targeting Orders (GTOs) are administrative orders issued by the Finan… #
GTOs are used to detect and prevent money laundering, terrorism financing, and other financial crimes. Financial institutions are required to comply with GTOs as part of their Anti-Money Laundering (AML) and Bank Secrecy Act (BSA) obligations.
**High #
Risk Customers**
High #
risk customers are customers who pose a higher risk of involvement in money laundering, terrorism financing, or other financial crimes. High-risk customers may include politically exposed persons (PEPs), customers from high-risk countries, or customers involved in high-risk industries or activities. Financial institutions and other regulated entities are required to conduct enhanced due diligence (EDD) and ongoing monitoring of high-risk customers to identify and mitigate potential risks.
**International Traffic in Arms Regulations (ITAR)** #
**International Traffic in Arms Regulations (ITAR)**
The International Traffic in Arms Regulations (ITAR) is a set of U #
S. regulations that govern the export and temporary import of defense articles and defense services. ITAR regulates the export of items that are specifically designed, developed, configured, or adapted for military applications, as well as technical data related to these items. Sanctions compliance programs for companies involved in the export of defense articles or defense services must include ITAR compliance measures, such as obtaining licenses and conducting due diligence on customers and partners.
**Know Your Customer (KYC)** #
**Know Your Customer (KYC)**
Know Your Customer (KYC) is a process of identifying and verifying the identity… #
KYC is an important part of customer due diligence (CDD) and sanctions compliance, as it can help identify and mitigate potential risks and prevent violations of sanctions regulations. KYC processes may include collecting and verifying customer identification information, conducting risk assessments, and conducting ongoing monitoring of customer transactions.
**List #
Based Screening**
List #
based screening is the process of comparing a list of names or entities against a sanctions list or watchlist to identify matches. List-based screening can be manual or automated, and is an important part of sanctions compliance. Financial institutions and other regulated entities are required to screen their customers and transactions against sanctions lists to ensure compliance with sanctions regulations.
**Negative News** #
**Negative News**