Sanctions screening guidance - Wolfsberg Group

The Wolfsberg Group is an industry association of 13 global banks which came together in October 2000 with the objective of developing financial service industry standards. In January 2019, the Wolfsberg Group issuedguidance on sanctions screening (the Guidance) aiming to help Financial Institutions (FIs) understand and develop controls which would detect, prevent and in the event of breach, manage any apparent sanctions risk. The aim of the Guidance is not for all FIs to apply the elements outlined, rather, it seeks to demonstrate where sanctions screening can be an effective part of a wider sanctions compliance programme.

FIs act as the front line against financial crime and in addition to anti-money laundering and counter-terrorist financing controls, FIs should also be able to ensure that they are not doing business which is connected to individuals, entities or countries subject to sanctions. Hence, FIs should have policies and procedures in place in order to minimise the risk of committing a sanctions breach especially in an environment where regulators have an increased appetite to impose fines following inadequate internal sanction procedures and/or actual sanctions violations.

The Guidance encourages financial institutions to adopt a risk based approach (RBA) to sanctions screening and to consider all the aspects of the sanctions screening control framework which is consistent with both the Financial Action Task Force’s guidance on an RBA and with the 4th European Anti Money Laundering Directive.

FIs are encouraged to use screening tools to assist them in effectively managing their sanctions risk. Nevertheless, it is generally accepted that it is not possible for a sanctions programme to detect every possible sanctions risk due to the wide variety of variables and the quality of data available. Different FIs have a different approach to sanctions risk, this can be attributed to the fact that different FIs have a different risk appetite or offer products or services in jurisdictions which carry a different sanctions risk.

Actions FIs can undertake to minimise their risk of non-compliance:

• undertake sanctions-based risk assessments to assess the likelihood of dealing with an individual or entity on a sanctions list;
• ensure they have adequate policies and procedures in place approved by senior management;
• appoint a responsible person with the appropriate skills and experience to deal with sanctions related issues;
• use technology as a tool to identify financial crime risk through real-time and ongoing screening methods;
• ensure they have proper internal escalation processes in the event there is an actual match;
• conduct screening tests to assess the effectiveness of the systems;
• ensure that all employees have been adequately trained in order to recognise any potential sanctions issue;
• ensure that the appropriate supervision is in place in key client facing/ money transmitting departments;
• ensure that senior management is committed to promoting sanctions compliance.

If you have any questions, or would like advice in relation to implementing a robust sanctions compliance policy, please contact Andrea Moundi Savvides or your usual Harneys contact.