Sanctions are intended to punish high-risk individuals or entities by preventing others from interacting or doing business with them. However, preventing the sale of products from sanctioned parties is more complex and an often-overlooked aspect of sanctions compliance.
In an increasingly interconnected world driven by online shopping, it’s easy for consumers to purchase products from all over the world without knowing where they originated. Yet anti-money laundering (AML) and other regulations require that ecommerce platforms and payment providers that enable online sales to prevent the sale of products from sanctioned entities.
This places ecommerce platforms and payment providers in a very difficult position.
How effective is your sanctions detection?
Most marketplaces and their financial partners maintain varying levels of programs aimed at detecting and preventing sanctioned activity. The problem is that these programs are only as good as the data and methods used for screening. Those using poor data and out-of-date rules are apt to over-screen or under-screen.
Both are problematic.
Over-screening occurs when there are too many false positives. This causes legitimate merchants to be denied or suspended. As you can imagine, this results in negative customer experience and potential loss of revenue.
On the other hand, under-screening creates issues, too. It allows sanctioned entities or individuals to slip through the cracks, exposing marketplaces and their partners to undue risk and potential regulatory action.
The ability to easily detect “true positives” – those actually committing sanctioned activity – at onboarding can zone in on bad actors, prevent illegal activity, reduce the dollar value of processed transactions and friction upfront. This also reduces friction between marketplaces and their respective regulatory authorities.
3 key elements of effective sanctions compliance
For effective sanctions compliance, your organization must have the ability to detect products originating from geographical areas under sanctions by the United Nations, the U.S. Office of Foreign Assets Controls, the European Union, and other entities. The end goal is to minimize the risk of costly fines from sanctions violations.
Here are three key elements required of effective sanctions compliance programs:
Global visibility With a huge volume of trade conducted online, and criminals collaborating across borders, it’s critical to have visibility into your merchant portfolio, to verify Ultimate Beneficial Owners (UBOs) of goods against all watchlists. Thorough screening enables organizations to detect the origins of products that may have originated from sanctioned areas such as Syria, North Korea, Iran, Cuba, or Russia.
Technology Using data-driven technology powered by AI helps marketplaces and payment providers to avoid blind spots that oftem stem from offline data, which is not current or comprehensive enough to provide an adequate assessment of your sanctions risk. Offline information sources exclude one of the most prominent venues for sanctioned activity (the merchant URL) and the actual goods and services being sold.
The volume and ever-changing nature of the information demands constant, ongoing monitoring, which is all but impossible to achieve without technological support.
Customization In order to be effective, technology solutions must be customizable to align with the potential risks you have identified as being the most likely to impact your business, as well as your organization’s risk appetite. For instance, it should allow you to search and filter lists that are relevant to your business. If you have existing systems that report findings, it’s also important to choose a tool that can integrate with these systems.
How to improve your sanctions detection
EverC empowers organizations to streamline their sanctions compliance programs, with our Sanctions Screening solutions and our Sanctions Insight services.
Our solution includes global and multilingual coverage using alphabets, languages, and transliteration.
Our team of experts combines technology and expertise to:
Conduct in-depth crawls of merchant URLs and product catalogs analyzed by a team of sanctions experts to discover product origin country
Investigate by combing through a large volume of URLs, using processes such as OSINT, and image detection
Provide evidence of violating product origin, including links, screenshots, and more
EverC solutions and services help marketplaces, payment providers, acquirers, and banks to mitigate sanctions risk while enhancing operational efficiency so they can focus on revenue and growth.