A high-profile e-commerce company recently settled with the Office of Foreign Assets Control (OFAC) for violations of U.S. sanctions regimes. While the headlines garner unwanted interest, they also illustrate how far regulatory focus has expanded to include non-financial institutions. As regulatory attention on businesses in the e-commerce and digital space heats up, few companies can avoid the potential consequences of a regulatory enforcement. Even businesses located outside the U.S. who conduct transactions in U.S. Dollars are at risk. Exorbitant fines, reputational damage and significant disruption to business operations make the impact of increased sanctions scrutiny too big to ignore. In this article, we explore what’s driving the shifts in regulatory policy and detail how an automated sanctions strategy can help your business avoid risk. 

Growth opportunities also open doors for bad actors to enter your customer ecosystem

Digital transformation has driven exponential revenue growth and expanded global market opportunities across nearly every industry. The same factors that fuel digital growth also represent a perfect formula for criminal activity to flourish and thrive. Rapid transaction processing, increased anonymity and a borderless marketplace create opportunities for financial criminals to hide behind faceless interaction, mask criminal activities and avoid detection by utilizing mule accounts, Virtual Private Networks (VPN) and proxies. Cross-border exchanges and the overall globalization of commerce also contribute to the potential for businesses to inadvertently conduct transactions with undetected sanctioned entities. This explosive growth of digital commerce represents more opportunities and channels for criminal activities to occur which has resulted in higher levels of regulatory oversight.

E-commerce and other internet-based businesses must balance the rewards of digital transformation with increased risk of magnified regulatory demands.  

Seamless customer experiences can co-exist with effective sanctions controls

Managing the increased risk of the digital environment and integrating risk-based sanctions controls into key customer workflows can be cumbersome and complex. Disparate solutions and overlapping workflows drive up false positives, increase manual workloads and create undue friction for loyal, trusted customers. A strategy that combines dynamic, digital identity intelligence with extensive sanctions and enforcements coverage can support a more risk-responsive and efficient risk management workflow.

Each part of the combined approach delivers unique insights that can help enhance and expand visibility into sanctions risk without impacting transaction speeds. Digital identity intelligence provides transaction behavior and device/location information that may reveal patterns that signal sanctions risk. Comprehensive sanctions and enforcements intelligence enables your business to confidently connect to current coverage of global sanctions lists.

Important considerations when implementing a combined approach to sanctions risk management include:

  • Automation: Do your risk assessment tools support automated, near-real time decisioning around sanctions risk without slowing down transaction speeds?
  • Flexibility: Not all transactions represent equal amounts of risk. Can your risk management tools easily tailor risk assessments to meet specific thresholds and do they readily adjust to reflect emerging threats and market changes? 
  • Robust digital insights: Are you utilizing digital identity intelligence that provides a near real-time view of digital risks built with contributory, crowdsourced data from more than 35 billion global annual transactions?    
  • Sanctions data quality: Can you access current and highly relevant coverage of worldwide sanctions lists including OFAC, European Union (EU), United Nations (UN) and Her Majesty Treasury (HMT)?
  • Deeper risk perspective: Does your sanctions intelligence include family members and associates of sanctioned entities, branches and operational units of sanctioned banks and entities owned or controlled by subjects sanctioned by OFAC, the European Union or HMT?

Is your sanctions strategy effectively supporting global growth while reflecting the most recent risk realities?  As you evaluate your position in today’s heightened regulatory environment, LexisNexis® Risk Solutions can help design a strategy that prioritizes business growth while helping your business proactively avoid sanctions risk. Connect with us to learn more.