What makes a “good” sanctions list?

Sanctions are essential to protecting the global financial ecosystem, but the details within sanctions lists can change often. Is there a way to improve these lists to make compliance easier? Discover our six-step plan to better sanctions lists.

The term “lists” is often loosely used in the sanctions space. Each sanctions regulator publishes their own list – which is content in their own format, and in line with their own distinct goals. There is no single list across the board.

This means that any effective screening programme must manage the challenges associated with consolidating regulatory data from disparate sources into screening systems – quickly and accurately. Tasks that list issuing bodies could simplify by followed some global best practices to create truly effective lists.   

A good sanctions list is designed to minimise these challenges, smooth the process of ingesting data and support effective, efficient sanctions screening.

But what does a good sanctions list look like?

Tracking all high-level changes relating to sanctions lists – for example, creating a summary of any subjects who were added, removed or changed – promotes transparency. Keeping a log of all relevant information relating to changes also helps ensure clarity around the timing and content of updates.

How it helps: A log allows you to evaluate changes more easily, ensure that changes are captured accurately, and minimises any surprises at the audit stage.

Updates that happen without warning can lead to operational challenges and uncertainty. For example, if a large update happens on a Friday afternoon, day-to-day operations could be impacted as a result of the unexpected additional workload. Worse, the changes may not be incorporated until the following Monday. This is a problem, because sanctions are often time-sensitive. Names should be screened immediately after a list is published to avoid the possibility of transacting with a newly-sanctioned individual or entity. 

How it helps: Publishing at set times – even if this is a during a pre-determined window – increases transparency and allows end users to be ready to accommodate changes.

Publishing content in PDF format ensures that data is delivered in the expected format – and cannot be tampered with – but this approach can make automated content uploads difficult, which impacts the speed at which new designations can be screened. On the other hand, publishing data in a technical format only ensures smooth processing but does not easily allow risk managers to easily understand the update’s impact. A good list offers a variety of formats.

How it helps: Offering a variety of formats speeds up processes and boosts efficiency: machine-readable formats enable automated ingestion and human-readable formats can be used to validate risk appetite.

Sanctions designations may need to be delivered to different places in different formats, but where separate formats are not updated at the same time, a lack of consistency can result. Ensuring that there are no content mismatches or differing delivery timings is essential. Consistency is key.

How it helps: Consistency removes unnecessary friction and helps financial institutions to understand exactly who and what to screen.

When adding, removing or updating large volumes of entries, errors can creep in. Fixing errors quickly benefits everyone, from the regulator to financial institutions – but corrections can sometimes fly under the radar. This causes challenges for the people aggregating the data. A good list will offer clear tracking and alerting for all changes.

How it helps: Clearly tracking corrections and alerting users to changes benefits everyone and helps to ensure that sanctions are correctly applied.

Fostering openness and promoting dialogue around the structure of lists – as well as offering guidance on how to interpret data – can benefit all stakeholders. Both issuing entities and those consolidating the information for financial institutions share a common objective: to ensure that the correct information is screened promptly, and that bad actors are identified quickly.  

How it helps: By offering clear lines of communication – and timely replies – issuing bodies can only strengthening their effectiveness. Where there is room for doubt, there can be unexpected consequences. Addressing concerns and queries quickly helps to streamline data delivery and strengthens the ecosystem for all stakeholders.

The goal of sanctions designations is to stop the activities of bad actors – and in this way protect the global financial ecosystem.

For this to happen, it is essential that financial institutions receive, understand and apply the latest sanctions information quickly and efficiently. The range of sources and inconsistent approaches that exist, however, means that both institutions and data providers often spend valuable time interpreting and collating this information.

This time and effort could be better channelled into more impactful areas, such as preventing money laundering and countering terrorism financing. Good sanctions lists – those that are well-structured and efficiently delivered – can help cut through the noise and equip global players to apply sanctions more effectively.