Table of Contents
Introduction
With the always-evolving financial landscape, sanction list screening holds a prominent position in mitigating the risks and threats involved with it. Effective sanction list screening is not only integral for compliance regulations rather it is equally important for all kinds of businesses, financial institutions, small and medium enterprises, and organizations globally. These entities and the people associated with them can avoid mishaps, scams, and fraud by implementing proper sanction screening systems. The other side of the story is about the people and numerous organizations, who use every kind of ever-evolving technology to avoid these sanction lists and sanction screening systems.
This is a growing challenge for MLROs to navigate and combat such evil summons timely. With AML Watcher, through this blog, you will have an understanding of the growing challenges of sanction screening evasion.
Additionally, let’s have a look at how crucial maintenance and constantly keeping up with the sanction screening process is.
Why Sanction Screening Process is Crucial?
Sanctions screening, which involves comparing an entity’s financial activity, partnerships, and customers with global sanctions databases, is an essential procedure for improving AML/CTF methods. Gathering information, confirming the data, comparing the confirmed data with international sanctions databases, looking into possible matches, recording a Suspicious Activity Report, and continuously monitoring the process are the six main stages of the procedure. Reducing financial vulnerabilities and guaranteeing compliance with international mandates, avoids serious repercussions and assures regulatory compliance.
The Growing Popularity of Sanction List Screening Software
With the advancement of technology, on one side businesses invest in automated screening software but on the other hand, the evil-doers and evaders also employ such technologies to avoid them. This whole cycle works in a loop and this viscous circle will never stop unless robust compliance checks are not made to monitor such illicit and fraudulent activities at the right time.
The growing advances in sanction screening systems and evaders put a focus on sanction evasion techniques.
The Santtion Screening is a process that is most Demanding in 2023 to Combat warfare in a digital world.
What are the Sanction Evasion Techniques?
There are different cases explained below to give an understanding of the techniques used to avoid sanction screening.
Case Number 1: Name Variations in Databases
In this case, sanction evaders usually change their names, and surnames. They practice this evasion technique by using nicknames. This helps them achieve their evil motive and intentionally avoid detection. For instance, Millan Moore could appear as “M. Moore” or “Moore. Milano”.
Case Number 2: Shell Entities
Another way of carrying out this evasion method is to set up a front or shell company to carry out the illegal transactions. These organizations frequently exist only to hide ownership and conduct no actual activity.
Case Number 3: Hierarchical Ownership Frameworks
Complex ownership structures are used by sanction evaders to conceal their involvement in such activities.
Case Number 4: Concealment
Sanction evaders usually hide their transaction details, properties, businesses, and most importantly money to avoid taxes, sanctions, fines, and penalties. Sanctions Violators may set up transactions such that the final destination, user, or consumption of the product is unknown to the exporter and other parties involved in processing a shipment. In certain cases, the intention may be to conceal the identity of the real buyer of a certain product.
These cases highlight the solutions for FIs and businesses to fight such challenges, as explained below!
How to Combat with Sanction Evasion Techniques?
- FIs and businesses can avoid these evil techniques by implementing thorough Due Diligence on their customers and business partners.
- Ongoing monitoring is crucial to never miss out on any important updates on individuals as well as enterprises. Ongoing monitoring involves the continuous inspection of all kinds of activities, these people could be involved in.
- Obtaining the fundamental data about the business, including its entire name, legal form, registration number, important contacts, shareholders, management, and ultimate beneficial owners. Additionally, look for connections to sanctioned individuals and Politically Exposed Persons (PEPs).
- Introducing strict criteria to monitor the customers such as multi-factor authentication, and asking customers some additional questions to fully understand the regular and irregular customers and business partners.
Wrapping Up
It is paramount to stay ahead of sanction evasion techniques by employing automated AI-driven and machine learning-based software. If this evil is present in society, there are many ways available to combat this too. On top of all, automated sanction screening software, enhanced due diligence, PEP screening, adverse media screening and ongoing monitoring of FIs and business customers can help a way out.
The selection of an appropriate partner is crucial for institutions and organizations that could handle such obstacles and for several strong reasons, AML Watcher stands out as the best partner and solution.
