This article explores the latest developments in the sanctions landscape, including recent enforcement actions and regulatory changes up to October 2024. It provides insights on the expanded scope of sanctions compliance, challenges in monitoring, and the consequences of non-compliance. The text also covers the G7's united approach to preventing sanctions evasion and the EU's harmonization of criminal offenses.
The Scope of Sanctions Compliance
Sanctions, imposed by governments and international organizations, present significant challenges for all entities involved in cross-border business. While financial institutions have long been at the forefront of anti-money laundering (AML) efforts, the responsibility for sanctions compliance now extends to a wide range of companies engaged in international trade, investment, and operations.
Understanding the Sanctions Landscape
Sanctions are targeted restrictions or bans on individuals, entities, or countries, aimed at addressing issues such as human rights abuses, terrorism, and weapons proliferation. The ultimate aim is to influence policies and actions of these actors. These measures can take various forms, including trade restrictions, asset freezes, and travel bans.
The complexity of the sanctions landscape is due to multiple governing authorities, including national and international actors like the UN1, EU2, UK3 and US4, each maintaining their own sanction programs with unique requirements.
Intensified Sanctions Enforcement Regime
In response to Russia's ongoing aggression against Ukraine, the EU, US, and UK have significantly expanded their sanctions regimes, focusing on enhanced enforcement and closing loopholes. Key developments include:
Expanded secondary sanctions: The US in June authorized sanctions on foreign financial institutions facilitating significant transactions supporting Russia's military-industrial base5
Strengthened anti-circumvention measures: The EU introduced an "anti-circumvention tool" allowing restrictions on exports of sanctioned goods to high-risk third countries6
Increased listings: Over 300 new individuals and entities were sanctioned across multiple jurisdictions
Targeted economic measures: New restrictions on Russian LNG projects, diamond imports, and critical technologies for drones
Enhanced supervision: The UK launched the Office of Trade Sanctions Implementation (OTSI) with civil enforcement powers within Department for Business and Trade in October 2024.7
Harmonized criminal offenses across the EU: The EU also stepped-up enforcement, with a new Directive8 adopted on April 24, 2024, to harmonize enforcement and penalty standards across the EU by May 20, 2025. The Directive establishes uniform criminal offenses and penalties for individuals and companies violating EU sanctions across all member states, aiming to create consistency in enforcement and close loopholes that previously existed due to varying national approaches.
G7 united approach on preventing sanction evasion vis-a-vis Russia
The G7 Sub-Working Group on Export Control Enforcement published on 24 September 20249 comprehensive guidance to combat Russian sanctions evasion, focusing on four key areas:
Common High Priority List (CHPL): Identifies items at heightened risk of diversion to Russia, including advanced semiconductors, machine tools, and chemical/biological weapons precursors
Red flag indicators: Updated list of suspicious activities, such as unusual shipping routes, opaque ownership structures, and sudden spikes in exports to third countries known for transshipment
Best practices: Recommendations for enhanced due diligence, including real-time transaction screening, thorough end-user verification, and implementation of "No Russia" clauses in contracts
References to publicly available resources for sanctions list checking and risk assessment, emphasizing the need for regular updates and cross-referencing multiple sources.
Challenges in Sanctions Monitoring
Both financial and non-financial institutions face similar challenges in sanctions monitoring:
Keeping pace with evolving regimes
Monitoring vast arrays of transactions and relationships
Time restrictions
Conducting thorough due diligence
Adapting to varying enforcement across jurisdictions
Responding to new payment methods, particularly digital currencies10
It comes down to governance: More Lists Mean More Problems
Consolidated sanctions lists, while intended to streamline compliance, often present a complex challenge for financial and non-financial institutions. The proliferation of lists from various providers can lead to confusion and inefficiencies in sanctions screening processes. Institutions must navigate a mentioned landscape of regulatory requirements, business relationships, and risk appetites to determine which lists to apply and how.
Key considerations include:
Regulatory obligations: Institutions must identify and comply with sanctions lists mandated by their jurisdictions (e.g., OFAC, UN, EU). They must also take into considerations that certain sanction regimes apply across national jurisdictions.
Business relationships: Corresponding banking and other significant partnerships may necessitate screening against additional lists
Risk appetite: Institutions may choose to screen against broader lists to mitigate reputational and other compliance risks
It's about governance. Organizations must decide which lists to use and for what purpose. This guidance determines actions for positive results. Extensive consolidated lists without clear rationale can increase false positives and confusion about mitigating actions, while requiring more resources for alert resolution. Risk assessment aligned with organizational risk appetite should drive list selection, not vice versa.
Consequences of Non-Compliance
The US financial regulator is known for severe penalties, which are intended to act as a deterrent to other companies. Beyond monetary fines, sanctions enforcement actions also serve a “naming and shaming” function that tarnishes violators’ reputations.11 In December 2023 Binance was fined with 4.3 million USD to send clear message to entire crypto industry.12 A subsidiary of Swedbank AB headquartered Latvia, agreed to pay 3.4 million EUR to settle apparent violations of OFAC sanctions involving Crimea in 2023.13 As mentioned sanctions are not limited to financial industry. In 2022 Danfoss A/S entered into settlement to pay 4 million USD to OFAC for apparent violations of sanctions against Iran, Syria and Sudan.14
Comprehensive Sanctions Compliance Solutions
Salviol offers a range of services and technological solutions to address the challenges of sanctions compliance:
RAALS sanction Screening platform
Real-time or scheduled comprehensive screening
Accurate and precise detection
Streamlined compliance workflows
Automated monitoring and due diligence processes
Data retention features
Clear audit trails
Flexible reporting
Regular maintenance of sanction lists
Compliance metrics dashboard
Complex pattern detection
Customizable RAALS Sanction Screening Solutions
RAALS cloud or on-premise solution
white-label solutions
system integration options (API, data synchronization, workflow integration)
customization to reduced training time, improved adoption rates, streamlined data flow, scalability, adjust to companies workflows
Sanction Screening Managed Services
At Salviol, we know that not every company can handle sanction screening themselves. That's why we offer a full-service solution tailored to your needs. Our team of experts from investigation and compliance department uses our software and does the screening work for you, finding potential matches and giving you actionable insights. Whether you're a small business going global or a mid-sized company streamlining things, our managed service gives you peace of mind and compliance support.
Advisory Services
We provide advisory services to help you address different aspects of your compliance program. Our team can assess the implementation, effectiveness, and areas for enhancement of your existing compliance systems and processes. We'll conduct thorough "look-back" exercises to identify any missed suspicious activities or sanctions violations, and provide recommendations to improve your current compliance measures.
Enhance your screening
As mentioned, different lists can be used to mitigate several risk. We can assist in improving your compliance efforts to mitigate AML; corruption and other fraud risk by enhancing your screening with:
list of Politically Exposed Individuals (PEI)
the FATF high/risk and monitored jurisdiction list
the EU high-risk third country list
Transparency International Corruption Perception Index
watchlists (Europol, industry specific lists)
adverse media reporting
internal blacklists (third parties with delayed payments, in breach of contract etc.)
Conclusion
As the global business landscape evolves, sanctions compliance has become a critical concern for all companies engaged in international transactions. By leveraging Salviol's comprehensive suite of technological solutions, advisory services, and managed services, both financial and non-financial institutions can effectively mitigate risks, avoid penalties, and maintain the integrity of their operations in an rapidly-changing regulatory environment.
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2 - EU Sanction list
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