It aims to show where sanctions screening can be an effective part of a wider sanctions compliance programme, where it has limitations, and where a risk based approach is appropriate.
The Wolfsberg Group has published new guidance on how financial institutions should carry out sanctions screening as part of an effective FCC (financial crime compliance) programme.
“In light of the continuous expansion and growing complexity of international sanctions regulations, the objective of this publication is for the Wolfsberg Group to provide guidance to financial institutions as they assess the effectiveness of their sanctions screening controls, whether automated, manual or both,” said the Wolfsberg Group, an association of thirteen global banks which aims to develop frameworks and guidance for effective financial crime risk management.
Sanctions screening helps financial institutions to identify sanctioned individuals and organisations, and the illegal activity to which they may be exposed, so that they can make appropriately compliant risk decisions, the guidance says.
It sets out the use of sanctions screening as a control, derived from legal and regulatory requirements and expectations, as well as global industry best practice, with an aim to demonstrating where sanctions screening can be an effective part of a wider sanctions compliance programme, where it has limitations as a control, and where a risk based approach is appropriate.
The Wolfsberg Group believes financial institutions should seek to adopt a risk based approach to sanctions screening, while also recognising that as a primary control it has limitations and should be deployed alongside a broader set of non-screening controls to be truly effective.
The guidance emphasises that good quality data is central to an effective and efficient sanctions screening process, and highlights technology as a key enabler in identifying financial crime risk on a real-time basis.
Other requirements of a robust sanctions screening programme include robust governance and oversight mechanisms, suitable staff training and supervision, and effective management information systems.
In bringing together the guidance, the Wolfsberg Group noted commonality in the design and execution of sanctions screening controls across its member banks, which suggests that core common practice exists in the industry.
It also noted a heightened increase in regulators’ mandate for the screening of domestic payments, which it says is more challenging than ever with innovation in technology and increased consumer expectations for instant settlement.
The guidance is available here.