In the last five years, banks have paid out over $11.5 billion in sanctions penalties.1 With global governments increasing the frequency that they utilize targeted economic sanctions, many financial institutions are struggling. The relentless regulatory environment is draining focus and resources away from core business goals. As the sanctions climate becomes more complex, banks need a way to reinforce their risk-based approach to sanctions and gain advantages over the dueling challenges of sanctions pressures and sophisticated financial criminals. This article details what’s driving today’s sanctions demands and explores how digital identity intelligence can deliver a more dynamic view into sanctions risk.

Complex Sanctions Challenges Create Ongoing Operations Obstacles

A convergence of factors has contributed to a seismic shift in the complexity of sanctions compliance: the rapid globalization of marketplaces, the furious rise of sophisticated cybercriminal networks and the proliferation of borderless transaction channels. Sanctions compliance is no longer a box to be passively ticked off and statically managed. Effective sanctions compliance demands proactive oversight underpinned by dynamic governance approaches and strong enterprise-wide commitment. Financial institutions are forced to keep abreast of a laundry list of overlapping and sometimes contradictory sanctions regimes that rapidly change direction and emphasis:

  • Office of Foreign Assets Control (OFAC)
  • European Union (EU)
  • United Nations (UN)
  • Her Majesty Treasury (HMT)
  • Hong Kong Monetary Authority (HKMA)
  • Monetary Authority of Singapore (MAS)

The onus lies squarely on the banks to detect, measure and avoid transacting with a sanctioned individual, associated entity or a controlling party with an ownership interest in a sanctioned entity. The mounting pressures are preventing many financial institutions from achieving the elusive goal of balancing effective sanctions compliance with core business objectives.

Non-Compliance Is Not a Viable Option

The levels of fragility that define today’s geopolitical outlook is bad news for business. A precariously evolving global marketplace further fuels regulatory oversight while simultaneously facilitating new opportunities for criminal networks. Sanctions compliance isn’t a topic that can be tabled until corporate timing is right or resources are readily available. Increasingly, long-term business sustainability is interdependent on an effective sanctions compliance strategy. The business imperative to avoid sanctions risk is integral to day-to-day operations and shareholder value, as illustrated by the damaging impacts of a sanctions enforcement:

  • Significant economic impacts through fines and penalties, which have the potential to be multi-jurisdictional and cumulative
  • Termination of the correspondent banking relationships that foreign financial institutions maintain in the U.S.
  • Reputational damage and unfavorable publicity
  • Diversion of resources to remediate the sanctions violation
  • Operations distractions and delays that impact the bottom line

Optimal sanctions compliance has become a business essential but it can’t be realized at the expense of efficient operations. Financial institutions must navigate a new way around enforcements risk that doesn’t hinder enterprise success.

Reinforce Your Sanctions Strategy With Near-Real Time Risk Perspective

A more risk-responsive sanctions compliance strategy can drive the efficiencies that enable core business goals and effective sanctions compliance to co-exist. Strengthening sanctions risk assessment with a dynamic, near real-time view of transactional behavior patterns and digital identity intelligence expands risk visibility beyond standard screening. Digital identity intelligence and transactional behavior insights can provide precise perspective into location, device identity and behaviors that indicate sanctions risk. Adding these deeper insights into sanctions risk assessments can also help uncover common tactics financial criminals use to evade sanctions detection, including mule accounts, VPNs and proxies and help flag a transaction for deeper investigation. Capturing a more inclusive and current view of sanctions compliance risk helps your business proactively avoid sanctions vulnerabilities which contributes to greater process and decisioning efficiencies.

Avoid Sanctions Risk With the Advantage of Digital Identity Insights

As your business realigns operations to meet rising sanctions pressures, it may be time to re-evaluate your compliance strategy. LexisNexis® Risk Solutions can reinforce your sanctions strategy and significantly raise risk visibility with the powerful combination of industry-trusted global sanctions and enforcements coverage and contributory global digital identity intelligence. Find out how we can help you achieve an effective sanctions compliance strategy that protects your business— so you can prioritize core business goals.

Learn more about our Financial Crime Compliance solutions.

1. https://www.ft.com/content/98e82234-16a8-11ea-b869-0971bffac109