LEXISNEXIS® RISK SOLUTIONS
Preventing payments headaches with up-front identification of sanctioned banks reduces repairs and costly failures, saves time and improves straight-through processing rates The global risk landscape has never been more complex. With the war in Ukraine triggering a wave of sanctions against Russia, sanctions activity reached record heights in the first half of 2022. Lists maintained by the four key regulators – the United Nations (UN), European Union (EU), Office of Foreign Assets Control (OFAC) in the US, and the Office of Financial Sanctions Implementation (OFSI) in the UK, changed constantly, with entities added, deleted and modified at an unprecedented pace. Although the number of updates for the first half of 2023 was down by 31 per cent, sanctions activity remains at historic highs, and that is likely to continue for the foreseeable future. All this activity puts pressure on firms to find new and better ways to safeguard the payment process. Banks and other organisations conduct sanctions screening to comply with anti-money laundering/countering the financing of terrorism (AML/CFT) regulations. While sanctions change constantly, the regulatory requirement to screen for sanctions remains steadfast. Doing business with a sanctioned bank or other
sanctioned entity puts every participant in the payments chain at risk. Keeping pace with ongoing changes to sanctions lists is a considerable challenge for all organisations, but the cost of non-compliance is steep. Globally, sanctions violations and anti-money laundering and know-your-customer (KYC) compliance issues cost financial institutions nearly $5billion in 2022, according to the Financial Times. That’s a 50 per cent increase over the previous year. Although the initial sting of a fine or financial penalty for non-compliance may be painful – and trigger increased regulatory scrutiny and onerous ongoing audits – the reputational damage caused by such a lapse can be even more detrimental and long-lasting. Automation that identifies sanctions early saves time and improves customer experience. Screening for sanctions early in the payments process provides an important layer of defence that strengthens compliance, saves time, and reduces friction for the customer.
GREATER CONTROL THROUGH EARLY IDENTIFICATION
delays, organisations should consider technology that provides greater control over sanctions screening earlier in the payment process. Several technology solutions are available to instantly validate customer-entered account details to ensure payments are routed to the correct account holder. They typically alert the payer in the event of an error, so changes can be made before the payment is sent to the bank. However, these systems do not check for sanctioned banks. Screening for sanctioned banks before initiating payment to the payee offers numerous benefits to all participants in the payments chain. In addition to reducing repairs and costly failed payments, saving time, and improving straight-through processing rates, early sanctions screening provides a smoother customer experience with fewer processing delays. Most importantly, early screening delivers an additional layer of security that strengthens compliance. When combined with accurate, up-to-date data, early screening also enables organisations to automate payments with confidence.
To keep pace with changing sanctions, ensure compliance, and prevent payment
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