Sanctions are a form of punishment for individuals or institutions that violate laws or regulations. Governments or international organizations often enforce sanctions against states or individuals as a means of exerting pressure to enforce compliance. Sanction checks are performed to prevent transactions with entities that have been prohibited from engaging in specific activities or transactions.
The imposition of sanctions is typically driven by political and economic conflicts between nations. For example, in the case of political differences, a nation may impose sanctions on another as a means of expressing disapproval and exerting diplomatic pressure. Economic sanctions may be imposed in response to trade disputes or as a means of preventing the flow of financial resources to entities that are deemed a threat to international security or stability.
In either case, sanctions are an important tool in global relations, used to signal disapproval and enforce compliance with international laws and regulations. It is crucial for individuals and institutions to understand the potential consequences of sanctions and take steps to ensure compliance with all applicable laws and regulations.
What Are The Types of Sanctions?
There are several types of sanctions that are based on different reasons in two scopes which are governmental and individualistic. The reasons and types of sanctions are significant for companies.
Governmental Sanctions
Economic Sanctions
Economic sanctions are a foreign policy instrument between "diplomacy" and "war." They are typically implemented by a government with the aim of achieving one or more of the following objectives ;
-
Changing the behavior of the target country
- Undermining the target country
- Punishing the target country
The severity and scope of these sanctions can range from mild to severe, and their success in achieving their intended goals is often dependent on the cooperation of other nations and international organizations.
Diplomatic Sanctions
Diplomatic sanctions are political measures taken by one or more governments to signal their dissatisfaction with the actions of another government. Examples of such sanctions include the cancellation of high-level government visits, the recall of diplomatic personnel, and the downgrading of diplomatic relations. These measures are meant to put pressure on the target country to change its behavior and can also serve as a form of signal to the international community about the state of relations between the two countries.
Military Sanctions
Military sanctions are typically implemented to restrict a target country's access to weapons or military technology. Some countries lack the capability to produce their own military equipment, making them dependent on imports from other nations. Military sanctions can be imposed to reduce the military capabilities of a target country, to restrict its ability to engage in military conflict, or to signal opposition to its aggressive actions. The most common form of military sanctions is a ban on the sale of military equipment, but other measures such as arms embargoes and restrictions on the transfer of technology can also be imposed.
Sanctions on Individuals
Individualistic sanctions are imposed on political leaders, persons with different economic interests, or criminal persons. Governments or organizations sanction terrorists, drug traffickers, and money launderers. Organizations and governments can put bans on their trade relations or their bank accounts.
Many regulators in the global and local areas control financial institutions. The purpose of these checks is to combat financial crimes. Regulators require related institutions to know their customers and risks.
Why Is The Sanction Check and PEP Check Required For Companies?
The sanction check and PEP (Politically Exposed Person) check are crucial for companies to comply with Anti-Money Laundering (AML) regulations and to avoid association with individuals or entities involved in illegal activities such as money laundering, bribery, corruption, or terrorism financing. These checks help ensure that a company is not knowingly or unknowingly engaging in transactions with individuals or entities that are subject to economic sanctions or are considered high-risk due to their political position. Compliance with these checks helps companies maintain the integrity of their operations, reduce legal and reputational risks, and avoid severe penalties and fines imposed by regulatory authorities. Financial crimes like money laundering, bribery, financing of terrorism, and corruption are a major concern globally and occur largely through financial systems. Therefore, regulators aim to prevent these crimes by regulating companies in the financial sector through various Anti-Money Laundering regulations. A sanction search is the most important process for financial institutions to ensure AML compliance and Sanction Screening Services such as Sanction Scanne r can help companies automate this process.
Sanction and PEP Screening in Customer Onboarding Process
The customer onboarding process is a critical procedure for financial institutions. According to "Know Your Customer" requirements, companies have to make some before onboard and mediating their financial activities. These checks aim to identify the customer's potential to pose any threat. In the first stage, the accuracy of the customer information is determined. After the customer identification information is verified, the customer's risk level must be determined. Customer Due Diligence and Enhanced Due Diligence procedures enable companies to determine the risk level of customers. The customer is scanned in sanction, PEP, and Adverse Media data in this process. A s a result of these controls, the risk level of the new customer is determined. If there is no suspicion, the customer's account can be opened. However, companies have to carry out checks at specific intervals.
Sanction and PEP Screening in Transaction Screening Process
Millions of financial transactions take place over the day through financial systems. Therefore, the
regulators determined that the crimes were committed through financial transactions.
Herefore, according to AML regulations, financial institutions must control the financial operations of their customers. I
f financial transactions are not controlled, money laundering and terrorist financing are committed. However, annually
controlling all transactions can be a waste of time.
Action Scanner provides automatic control of financial transactions with its PEP Screening service with API support.
Receivers and senders performing the process are checked in seconds in various data of 200 countries. I
f there is a suspicious transaction, the system gives an alarm and stops the financial transaction. Thus, financial crime is prevented.
Screening in Employee Background Check Process
The most important thing for companies, other than financial gain, is the company's reputation. If a
company loses its reputation, it loses its customers.
Companies make internal controls at regular intervals to avoid these risks.
Employment Background Check, Pre-employment background check ve the company takes company background check measures to protect the company's reputation.
E ployment Screening is performed on our employe to check the possibility of any risk for our company.
With the pre-employment screening, the compliance of the person we will employ to our company values is determined.
C companies present their Employment history records as evidence of their audit status.
How Do Companies Comply With Regulations?
Financial institutions have to sanction check their customers to comply with Anti-Money Laundering (AML) regulations. Financial institutions need sanction screening to protect their reputation and not violate sanction decisions. With the development of technology, manual sanction checks became a waste of time. There are over a thousand sanctions lists in the world. C companies can't check them manually. An artificial intelligence-driven compliance software solved this problem. T is software that automates the compliance process of companies. F financial institutions can quickly check their customers with compliance software. It is software that scans the sanction lists and alarms instantly for suspicious transactions.
Sanction Scanner
provides
AML Name Screening Software
and
Transaction Screening Software
o
r AML Solutions monitor comprehensive global sanction, PEP, and Adverse Media data in real-time
M et your AML obligations in customer onboarding and transaction screening with Sanction Scanner.
