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The Nuances of Effective Sanctions Screening

Watchlist and Name Screening is More Complex Than You Might Think - Some Areas of Consideration  

Ensuring that your organization has in place a robust sanction screening program is more important than ever - for regulated financial institutions, as well as globally exposed corporates who are also facing a growing number of regulatory and reputational expectations.  For example, on May 1, 2024, the U.S. Treasury's OFAC released a tranche of hundreds of newly sanctioned names in response to the continuing conflict in Russia.  This, and previous announcements specific to Russia following its invasion of Ukraine, highlight why your programs must be persistent and global in nature to keep up with a fast-moving risk landscape.     

Considering sanctions-related risk exposure and optimizing your approach to address exposure is essential.  Why?  Consider that business is more international than ever, the vast majority of transactions involve (at some point) U.S. Dollars and broader requirements are in place from other jurisdictions like the United Nations, United Kingdom, European Union and others.  The regulatory hook here, if not considered fully, can lead to significant reputational business harm, large financial penalties and loss of business and financial access.

To meet these challenges, firms must take into consideration quite a lot of nuance in their sanctions program - from putting it in place, to selecting high-quality data, to tuning and testing their system.  Meaning, the data in, the data used for matching and the algorithms that drive the results all must be accounted for if the desired results are to be delivered.  When thinking about efficiency and effectivness, for example, consider the following: 

- Did you know there are more than 140 entries in the consolidated OFAC file that provide date-of-birth ranges vs. dates of birth? This can lead to missed hits and other issues if not considered as part of your sanction screening program.  At Sigma360, we optimize and ensure you match when your client information is in that range. Outcome: Greater accuracy and false positive reduction.

- Did you know that in the latest OFAC release on May 1, 2024, many of the companies are partially owned or associated through ownership with hundreds of other companies that may be directly used to evade sanctions?  A deluge of recent guidance highlights the importance of considering sanction evasion risk.  At Sigma360, we provide known relationships as a system configuration to drive useful context and risk attributes to be on the look out for. Outcome: Greater context in screening and investigations, particularly where transactions and payments are cross border.

- Did you know that corporate prefixes in Russia, Belarus and Ukrainian are not always the same and sometimes use slang in official documentation?  Not accounting for this can lead to lack of matching and missed sanctions risk.  Pre-processing and optimizing sanction files can help drive better name matching and false positive reduction. Outcome: Risk caught, lower false positives.

- Did you know additional information related to sanction actions can be found in unstructured data like news, investigative reporting and even official statements by U.S. Treasury that are NOT contained in the sanction files?  At Sigma360, we believe media is a critical component of an effective risk-based approach and should be used where high signal-to-noise ratios can be attained. One-at-a-time media searches are outdated and prone to missed risk versus more automated ones, that leverage the latest technology.  We specialize in finding risk in unstructured data and are leading novel approaches to increase overall system accuracy and configurability for end users. Outcome: Additional insight and risk management across certain client types, services and geographies.

When improving or replacing your existing system approach to watchlist and name screening, some of the things to think about include (but are not limited to):

1. Data quality, coverage and update frequency - This applies to both the external data you use (e.g., sanctions lists, etc.), as well as the quality of your internal data.  The saying, garbage in, garbage out is largely true here.  Ensuring quality data is critical to the effectiveness of a sanction program.  And in turn, higher data quality will invariably drive the accuracy of the results.  For example, not having customer date-of-birth available will limit matching, as will missing location data and other key inputs.  Vendors like Sigma360 can work with you to improve your data through entity resolution and other approaches, configure the system and achieve demonstrable improvements in signal as a result.

2. Automation, system speed and ease of configuration - Greater automation can help drive more frictionless experiences for client onboarding, ongoing screening and payment processing time.  This automation also carries through the ultimate determination - through smart rules - whether or not an event/alert is actionable or not.  In addition, the speed and scale that the system can process, particularly for large organizations, as well as the cadence of screening (persistent versus overnight) is another importance consideration.  And finally,  you must ask yourself: Can I test and configure the system myself?  In most instance the answer is no, but in Sigma360, you can configure specific test groups and dial in your tuning without relying on an army of engineers and data scientists.  

3. Platform testing and explainability - Fundamental to watchlist and name screening is testing.  Ensuring your lists and your configuration is dialed in, documented and explainable is essential to validating your approach and protecting your institution.  

4. External data enrichment - Screening watchlists and sanctions can be improved significantly through file enrichment.  For example, connecting sanctions to other records (like news or corporate registries) can help drive better matching and alert-related context.  So too, can addressing elements of sanction entries that commonly cause mis-matches like corporate prefixes and suffixes or honorifics for individuals.   

5. Reporting  - In this context, having robust business intelligence/management reporting on alert volumes, open and escalated cases is key.  


Getting your watchlist and name screening system dialed in is more critical than ever.  Legacy approaches to software and data management are being replace by newer, more modern ones that enable ease of configuration, deployment and testing.  Moreover, new approaches enable the scope of risk covered to be configurable depending on the client type.  We call it targeted screening.   

To find out more about Sigma360’s approach to advanced adverse media capabilities please request your demo today.

How can Sigma360 help me stay ahead? 

Using Sigma360's risk decisioning software platform, organizations can not only get ahead of risk, but leverage unstructured data - like the news highlighted in this article -  to further contextualize its impact and how it manifests across other entities that may impact counterparty relationships.  

To see Sigma360 in action, book a demo.
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