Sanctions compliance is a strict-liability obligation. Unlike other areas of compliance that use risk-based approaches, executing a transaction for a sanctioned individual or entity is a direct violation of law, regardless of the internal controls in place.
Key International Sanctions Authorities
Organizations screen transactions against major global databases:
- Office of Foreign Assets Control (OFAC): Enforces US economic and trade sanctions based on foreign policy objectives. OFAC maintains the Specially Designated Nationals (SDN) List, which blocks assets and prohibits US persons from dealing with listed targets.
- EU Consolidated Sanctions List: Contains all individuals, groups, and entities sanctioned by the European Union. These restrictions apply to all EU citizens and entities operating inside the bloc.
Managing Politically Exposed Persons (PEPs)
A Politically Exposed Person (PEP) is an individual who holds a prominent public function, such as a senior politician, judge, or military official. Because of their position, PEPs face higher risks of bribery, corruption, and money laundering.
[Identify PEP/Relative] ---> [Escalate to CCO] ---> [Verify Wealth Source] ---> [Apply EDD Controls]
Compliance programs do not block PEPs automatically. Instead, they require executive approval to open accounts, mandate detailed source-of-wealth verification, and apply continuous monitoring to keep processing risks within approved boundaries.
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