With sanctions set to escalate, implementing a robust sanctions search solution is an obvious next step

12th April 2022BlogStuart Favier

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Sanctions are growing at an alarming rate

The Prime Minister’s recent visit to Ukraine brought into stark reality not only the seriousness of the situation but also the role of ongoing sanctions and ever-increasing pressure on UK organisations to ensure they remain current with the latest sanctions and are doing the right thing.

Economic sanctions imposed against Russia for invading Ukraine are the most comprehensive and coordinated actions taken against a major power since World War II. Multinational companies across all sectors have, and continue, to pull out of the country, taking their products, services, and jobs with them.

Imposing sanctions deters bad behaviour

Sanctions of this nature are not new and have been used for centuries. In 17th- and 18th-century Europe, sanctions were frequently implemented by countries and included prohibitions on trade and bans on trade in certain commodities.

Today, sanctions continue to play an important role and are commercial and financial penalties applied by one or more countries against a targeted self-governing state, group, or individual. The primary objective of imposing sanctions is to deter bad behaviour, enforcing punishment on the targeted country, company or individual and to force rehabilitation, or changed behaviour. However, the success of sanctions depends on their effective enforcement.

Here in the UK, financial sanctions prohibit an organisation from carrying out transactions with a listed individual or company and this applies to all transactions, there is no minimum financial limit.

Every organisation must perform a regular sanctions search against the lists applicable to their business to ensure clients, be they individuals or companies, are not on any government or international watch lists. Such sanctions and restrictions are put in place by the UK government or multilateral organisations and apply to most companies and industries, even if the organisation is not regulated by the Financial Conduct Authority.

image of sanctions with icons of boxing gloves and paperwork around it

Organisations have a duty to put proportionate systems and controls in place

Organisations should have proportionate systems and controls in place to reduce the risk of breaching financial sanctions. Deficiencies in their processes or worse still, not having a detection system in the first place, has led to sizeable fines. The UK government regularly publishes its Sanctions List, which provides details of those designated under regulations made under the Sanctions.  This list is updated every time a decision is made to make, vary, or revoke a designation.

The list is published on GOV.UK and sets out which people, entities and ships are designated or specified under regulations made under the Sanctions and Anti-Money Laundering Act 2018. To provide some context, since the invasion of Ukraine began in February 2022, the UK has sanctioned over 1,200 individuals and businesses – including 76 oligarchs and 16 banks with a global net worth of £150 billion and £500 billion respectively.

The importance of an automated sanctions search solution

Indeed, here at Northdoor, we have witnessed first-hand how companies, concerned about falling foul of sanctions, are looking for an easy-to-use automated solution. With an increased need for organisations to safeguard against breaching current global watch lists, Northdoor’s Sanction Checker has seen a sharp rise in demand.

This is not a once and done assessment, businesses need to check their client base and supply chain regularly against this ever-growing list of sanctions.

Regulations state that businesses must have a system in place that is up to date and provides an historical audit trail.  Unfortunately, all too often this is just a standalone spreadsheet, updated by one individual which makes it a very manual and onerous task. But now as the sheer volume of sanctions continues to grow, such spreadsheets and processes are no longer a viable option.

The remit of a robust sanctions checking process doesn't only cover the checks themselves; a clear audit trail that's fed with accurate information is vital for compliance. Click To Tweet

Daily updates to sanctions are required

Systems must be updated daily to ensure that the organisation is not falling foul of any new sanctions.  There are multiple lists, multiple companies and the sanctions landscape is becoming increasingly complex and dynamic. Therefore, any solution needs to keep track of all these moving parts. For example, our optimised search features and false positive management processes take a fraction of the time to use compared with manual lookups and less sophisticated products.

Our sanctions search tool checks against government publications across the UK and EU revealing global, European and UK financial sanctions alerts and this service is updated every night so that it is always current.

Only pay for what you use

Organisations must also implement a solution that will search for all associated companies or parent companies so that they can put their supply chain and whole business ecosystem through appropriate checks.  Likewise, we find that clients regularly want to run their whole customer list through our application. This is where our concept of unique searches for clients, where they are only charged for new searches and they can check old searches at no extra cost, really comes into its own.

Any solution that customers look to utilise should easily integrate into existing systems and databases. Integrating not only enhances the capability of existing systems but it also improves workflows and delivers greater efficiency by eliminating rekeying of information as well as enhancing data protection around information stored. Companies currently using our solution include Affirmative Finance, Cheval Bridging Finance, Morning Data, Munich Re, Stenham Group, Windsor Lloyd’s Brokers, and many more.

Growing complexity, stiffer penalties, and reputational damage

The sanctions market is only set to get more complex, and more and more organisations will start to face fines and reputational damage should they be found to be dealing with an individual or company on a sanctions list.  Therefore, automating this process and ensuring peace of mind that you have sanctions covered seems an obvious next step – both from a financial and reputational perspective.

Want a tool that provides regular global financial sanctions alerts, completes a comprehensive sanction list search, and operates on a pay-by-usage basis? Learn how Northdoor’s Sanction Checker software can help.

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