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12) Does your organisation have pre-transaction screening processes that makes use of all applicable economic and trade sanctions lists?

August 19, 2021
Financial Risk
Pre-transaction Screening

Answer yes if your organisation conducts pre-transaction screening that makes use of all applicable economic and trade sanctions lists. Please list the relevant lists used in the notes. Please check our knowledgebase to review this control's applicability to your organisation.

It is illegal for any entities to conduct business with individuals or entities within countries that are currently under financial and trade sanctions. Furthermore, Firms which are subject to FCA regulations have a statutory and regulatory requirement to comply with the UK sanctions regime. This covers:

  • credit institutions;
  • financial institutions;
  • auditors, insolvency practitioners, external accountants and tax advisers;
  • independent legal professionals;
  • trust or company service providers;
  • estate agents;
  • high value dealers;
  • casinos.

For firms that exist outside of the above list it is still recommended that they complete a risk assessment to highlight where they are most exposed or at risk. Effective controls and processes should be implemented to mitigate this risk.

This control looks at your company's pre-transaction screening process to ensure ongoing compliance with sanctions. This is typically combined within your wider AML controls as part of your KYC/KYB process.

To aid in the prevention of money laundering and terrorist financing, it is standard practice (except for a small number of situations) to complete your due diligence prior to entering into a business relationship with a customer or prior to an occasional transaction taking place.

Once your customer has been identified and verified there is no requirement to verify their identity again unless a trigger event occurs.

Potential Trigger Events could include:

  • The product or service that you supply to the customer changes.
  • Concerns are raised regarding previous information collected and its validity.
  • Suspicions of money laundering are raised.

Your approach to due diligence should not stand still, on-going monitoring should be carried out to allow you to pick up on trigger events which may impact your risk and the level of due diligence that is required. On-going monitoring should include the nature of the business relationship as well as financial sanctions and politically exposed person screening.

Financial and Trade Sanctions Lists

Financial sanction lists and politically exposed person databases are continually evolving, with individuals and entities being added, updated or removed. Due to the nature of these lists and databases, on-going screening can be a vital tool to ensure you are aware should your customer become listed.

The following databases should be used within your pre-transaction screening process:

  • European Union;
  • HM Treasury;
  • Office of Foreign Assets Control (OFAC);
  • United Nations;
  • Other Sanctions List(s) as appropriate.

How to implement the control

If your company falls in scope for trade and financial sanctions regulation it is best you seek professional external advice on how to comply with it. We'd recommend speaking to a lawyer or regulatory consultant.

If your company doesn't do business in geographies where sanctions exist, or doesn't conduct business activities that are considered high risk (such as financial services), then you may not need to implement any sanctions controls.

If you would like to contribute to this article or provide feedback, please email Contributors will be recognised on our contributors page.

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