Sanctions are punishments that are imposed on persons or organizations who violate laws or norms. Governments or global organizations usually impose sanctions on other countries or persons. A sanction scan is used to avoid transactions with people who are barred from participating in specific transactions and activities. Sanctions are imposed for a variety of reasons. The primary reasons are political and economic disagreements. Political and financial disagreements between nations result in penalties.

What is a Sanction Scan?

A sanction scan is a method of detecting and preventing financial crime, which assists businesses in reducing their financial risk exposure. More specifically, it compares an organization’s records to data lists to check if there are any similarities, indicating that the records contain sanctioned parties with whom you do not want to do business.

Even though sanction scan appears simple, it may be complicated when dealing with larger data sets that frequently contain mistakes, missing data, and false positives. As a result, finance teams frequently spend a significant amount of time manually understanding and analyzing some of the screening findings.

One of the primary motivations for firms to use sanction scan is to comply with local or international governments while also minimizing risk by detecting potentially hazardous business counterparties early on. Organizations also utilize sanction screening as part of a bigger risk-based strategy, and it is seen as a key step in procedures such as Know Your Customer (KYC), Anti-money Laundering (AML), and Countering Financing Terrorism (CFT).

How Does Sanction Scan Work?

Sanction scan compares an organization’s reference or transactional data, such as customer data, business partner data, and payments data, to sanctions list data to identify any signs of overlap with sanctioned parties. When corporate records match the sanctions list, they are identified and designated for further investigation.

You can manually enter data into online search tools of sanction list providers, or you can upload bigger data sets for screening. Some solutions can also scan your data automatically regularly or every time you submit manual payments or payment batches.

Sanction Scan Best Practices

To summarize, there are a few important practices to follow if you want to make sanction scan as effective and precise as possible. They will also assist you in minimizing financial penalty threats.

• Check whether sanction scan requirements are in effect in your countries and ensure that you follow them.
• Remember to conduct frequent sanction scans to stay up to current on the latest developments, including newly sanctioned parties.
• Perform both reference data and transactional screening to guarantee that both business partners and transactional counterparties are trustworthy.
• To ensure a seamless screening procedure and a trustworthy conclusion, ensure that your data formats match the sanctions screening lists. This reduces the number of false positives that must be investigated.
• Screen your data against recognized lists using trusted technologies that can guarantee the required results.
• Remember to review highlighted screening findings and follow up with them to ensure the proper measures are performed.
• Consolidate data and screening procedures whenever feasible to save time and money. The more systems you employ, the more complex it becomes.
• Use automated technologies to screen for sanctions regularly or whenever payments are made. In this manner, you may eliminate time-consuming manual data inputs and screening results analysis.