Payments industry: the impact of dynamic global sanctions 

A complex and constantly evolving global sanctions landscape has far-reaching implications for the payments industry. Payments players must remain compliant with evolving global sanctions but must also ensure that sanctions screening is fast and efficient, and does not slow the pace of business.

• Global sanctions present a range of challenges for payments industry players, who must always ensure compliance with all applicable sanctions – without slowing the pace of business.
• Legacy systems may leave firms vulnerable to sanctions risk.
• A technology-driven approach enables faster, more frequent updates that not only ensure sanctions compliance, but deliver a seamless, efficient customer experience.

The global sanctions landscape is complex. An ever-shifting geopolitical backdrop, the wide-ranging implications of both explicit and implicit sanctions, and ongoing sanctions inflation have all coalesced to create a dynamic sanctions environment. 

This sanctions backdrop presents a range of challenges for global payments industry players, who must ensure compliance with all applicable sanctions and consequently cannot transact with any sanctioned individual, entity or country.

This means that sanctions screening prior to any payment needs to be thorough, complete and quick, so as not to impact the pace of business in a sector that is defined by its ability to deliver speed and efficiency.

Many organisations have traditionally managed sanctions lists through legacy extract, transform and load (ETL) processes in which list updates are carried out daily or weekly. Whilst this approach has largely been sufficient in the past, the current, highly dynamic sanctions landscape poses a different set of challenges.  

ETL methods often involve batch processing, which is both time-consuming and resource-intensive. These methods are becoming increasingly unfit for purpose in today's dynamic regulatory environment, because in the period between an update published by a sanctions list provider and its integration into an organisation's systems, that organisation is effectively exposed to the risk of doing business with a newly sanctioned entity.

It is important to fully appreciate that even short time delays pose a high level of risk in today’s environment. The potential legal, financial and reputational consequences of inadvertently engaging with a sanctioned individual or entity can be severe, which means that organisations need to understand the implications of all relevant sanctions – and they need to be able to do this at speed.

A proactive, technology-driven approach to sanctions compliance can effectively remove this window of vulnerability.

By moving away from legacy ETL processes to dynamic, technology-driven sanctions management, organisations can enable faster, more frequent updates that not only ensure compliance, but deliver a seamless, efficient customer experience. 

• But what does a technology-driven solution look like? An effective solution must be able to:
• Manage the ingestion, processing and integration of sanctions data from multiple providers, in different formats.
• Ensure that this data is up-to-date and accurate at all times.
• Handle streamed updates, reducing the time lag between releasing new sanctions data and incorporating this into an organisation's systems.
• Offer flexibility to accommodate sanctions data formats or source changes.
• Provide the potential for customisation to specific organisational needs and allow for seamless integration with existing systems.

Many organisations may choose to outsource their sanctions screening needs to a third party and leverage the capabilities of a specialist provider able to offer comprehensive sanctions data that is complete, accurate and up to date.

Such an approach allows organisations to hand over the complexities of sanctions list ingestion, sanitisation and delivery. This is often a highly cost-effective approach and additionally frees up internal resources that can be re-allocated elsewhere in an organisation.

Smaller organisations in particular – especially those that may not have the IT maturity to develop and maintain in-house solutions – are likely to find the outsourcing model an effective option.

Outsourcing to a specialist provider able to implement a proactive, technology-driven approach is also an effective way to future-proof sanctions compliance in a stringent regulatory environment that is increasingly shaped by ongoing evolution in the sanctions space.