Sanction checks for cross border payments

For any company doing business internationally, a robust system for performing sanction checks ensures legal compliance and reduces the risk of fraud or illegal funds entering your payment process.

Has your business ever tried to cash an international check? Depending on all the parties involved — different countries, banks, clients, transfer methods — it can take weeks to clear. When we are talking about substantial amounts, such a delay can have a material impact on business operations, payroll, invoicing, cashflow and is simply unacceptable in conducting business when transactions are expected to be completed in real-time.

Welcome to the world of cross-border payments, where you have to deal with different regulations, payment standards and customs, just to get your money. On top of that you have all the normal payment issues that comes along with any business relationship such as invoicing and collections. It’s a small wonder cross border payments work at all.

As with all payment systems though, technology is dramatically speeding the process, reducing friction and enabling new commercial opportunities. There’s a whole host of players and technologies that are jumping in to offer solutions, as well as new offerings from established players.

For example, in June, SWIFT announced that [tweet_dis excerpt="73 banks worldwide join #SWIFT global #payments innovation initiative — handling 75% of cross-border payments."]73 banks worldwide have now joined its global payments innovation initiative and that network of banks handle 75% of cross border payments.[/tweet_dis] In the last few weeks, Visa announced Visa B2B Connect, a partnership between the payments giant and blockchain startup. For business users, it appears like the traditional Visa processing on the front-end, but has enterprise blockchain infrastructure working behind the scenes — one of the first commercial products launched using blockchain.

However, faster transactions also speeds up the opportunity for illicit funds and fraud to enter payment systems. It’s tough on banks, which operate internationally, and are well aware of the various compliance regulations and advanced techniques used by money launderers and fraudsters. For other parties though, cross border payments make them highly susceptible to illegal or damaging actions. It’s not enough to rely on the bank, companies have the duty, and responsibility, to ensure that their operations are dealing with proper funds.

Sanction Checks

Take a look at the news and it’s no wonder the requirements for AML (Anti-Money Laundering) are growing; the Panama Papers, and the events in Paris and Brussels show the dangers of corruption and terrorist funding. To ensure a company does not allow tainted funds into their system, they need to:

  • Verify identity
  • Perform due diligence
  • Run ongoing monitoring

When dealing with foreign nationals (or anyone, for that matter), you need to ensure that they are on not on sanction lists; lists of individuals that are, or could be, compromised by illicit funds. include politically exposed persons (PEPs), someone entrusted with a prominent public function or their family members of close associates. Due to their position of power and influence, these people present a higher potential risk of involvement in corruption and bribery.

These AML sanctions lists, referred to as watchlists, are a compilation of multiple regulatory and enhanced due diligence lists from all major sanctioning bodies around the world, including global lists such as OFAC, UN sanctions, EU sanctions, HM Treasury and PEP, and in-country lists.

Doing business with those on sanction lists can have serious consequences. For example one firm, BNP Paribas, paid just under $9 billion in fines and 13 other firms paid over $200 million in fines in the US between 2008 and 2015. While banks generally face the harshest fines for non-compliance, other companies and even individuals are coming under increasing scrutiny.

Fines for Noncompliance

In one pending case, that might be a landmark decision, the former chief compliance officer of an international money transfer service provider is being held personally liable for the company's deficient AML compliance program and faces a $1 million dollar fine.

These sanction lists are not static, they change due to changing regulations and changing status of individuals. Recently, the US has changed sanction standings for Iran, Cuba and Myanmar. With all the different sanction lists, all the individuals being added (or dropped), how do you effectively keep track of them all?

Again, technology can play a significant role here. Automatic AML sanction checks and screening screens verified names against up-to-date sanction lists for potential matches. Any ‘red flags’ can then be further scrutinized by the compliance team. This saves substantial time by enabling compliance to focus on the most serious cases and bypassing as many manual steps as possible.

When considering a sanction check solution there are numerous factors to consider:

  • How comprehensive is it?
  • How current is the data?
  • How seamlessly can it be integrated, adapted and customized?

For a deeper analysis on exactly what you need to consider for your sanction check compliance, visit:

Checklist for Global AML Watchlists:  Ten capabilities to look for when considering an AML sanctions lists provider.