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3. Sanctions Screening

Effective from 8/9/2021

As per Article 21.2 of Cabinet Decision 74, LFIs are required to perform regular searches against applicable sanctions lists of their customer databases, parties to any transactions, potential customers, beneficial owners, and persons and organizations with which the LFI has a direct or indirect relationship, as well as continuous searches of their customer database before conducting any transaction or entering into a business relationship with any person. Sanctions screening systems and processes are essential, but are also only as effective as the customer and transactional information used when comparing against applicable sanctions lists. Therefore, effectiveness depends critically on the completeness and accuracy of information obtained through the application of CDD/KYC measures and contained in payment instructions and other transactional data fields.

Sanctions compliance personnel should escalate for priority remediation identified omissions or inaccuracies in relevant customer or beneficial ownership information, as well as gaps or data quality issues in required transaction or payment message fields. On a risk basis, LFIs should perform sample testing of payment messages to ensure proper usage of message types and compliance with payment transparency requirements.

An effective sanctions screening program consists of the following core elements:

 •A well-calibrated risk-based framework: The risks LFIs face are dynamic and the transactions they carry out may be varied and high in volume. LFIs should therefore review and enhance their sanctions screening frameworks regularly and upon the occurrence of specified “trigger events,” such as material changes in the LFI’s business or risk profile or its legal and regulatory environment, to ensure that they remain tailored to the institution’s financial crime risks.
 
 •Robust training and risk awareness: To ensure proper functioning and implementation of their sanctions screening programs, LFIs should ensure that personnel with sanctions screening responsibilities have adequate experience and expertise and receive role-specific training on the institution’s sanctions screening policies, procedures, and risks.
 
 •Meaningful integration into the sanctions program: LFIs should ensure that their sanctions screening systems and frameworks reinforce, and are reinforced by, the wider sanctions control environment of which they are a part. An effective sanctions screening program depends on the quality and completeness of data drawn from the LFI’s customer and transactional systems and databases. In tandem, the outcomes of sanctions screening should inform the LFI’s understanding and management of its financial crime risks, including by prompting off-cycle customer reviews and the application of enhanced scrutiny or additional controls to higher-risk customers or transactions, as warranted.
 
 •Active oversight: The LFIs’ board and senior management should take an active role in overseeing the performance of their sanctions screening programs and driving the ongoing enhancement of sanctions screening systems on the basis of the institution’s risks. Where the outcomes of sanctions screening are compromised by factors such as inappropriate calibration, process inefficiencies, staff issues, or system failures, it is necessary that the board (or a board-designated committee) and senior management be made aware of these issues in a timely manner so as to ensure that they are promptly and adequately remediated. The board and senior management should also communicate clear risk appetites within their institutions and set a strong tone from the top that the implementation of targeted financial sanctions is a priority. A quality assurance process should also play a crucial part in the sanctions screening program, by validating the review from accuracy and detail perspective.