Sanctions are measures implemented by governments to restrict or prohibit trade with parties involved in illegal activities, while sanctions screening is a process that detects potential matches between organizational operations and global sanctions lists.
The text highlights the complexity of sanctions, distinguishing list-based or smart sanctions, which target particular persons, entities, and organizations, and secondary sanctions, targeting third-party actors. Additionally, challenges include the increasing use of sophisticated sanctions evasion techniques, such as the use of Virtual Assets, and a rapidly changing geopolitical environment.
The text highlights that all businesses, not just those in the financial services and fintech industries, need to comply with sanctions regulations and screening requirements. Non-compliance with sanctions can lead to hefty fines; in the U.S alone, OFAC‘s enforcement penalties reached $1.2 billion in 2019.
