Russia’s invasion of Ukraine has dominated the second quarter of 2022. And we have been developing resources for teams managing the fast-changing area of sanctions compliance that has evolved since the invasion began in February.
The Russian invasion of Ukraine led to far-reaching sanctions being quickly imposed on Russia and individuals associated with its government. Companies have always had to comply with sanctions, but recent months have seen the most frequent and encompassing changes to sanctions regimes for many years.
Understanding your exposure to sanctions risks and gaining transparency of your business network can be hard to achieve. Corporate structures are intricate, as are relationships with third-party vendors. Still, sanctions compliance is a legal requirement and businesses need to act decisively. Sanctions lists are being updated in many countries, so companies need to understand where they are exposed, gain clarity over their business nexus, and find ways to simplify compliance processes.
Moody’s Analytics KYC team, which includes PassFort, has published webinars, podcasts, and blogs throughout Q2 for teams monitoring sanctions compliance on a daily basis. Here’s a selection of what is available.
Understanding indirect ownership and control
To comply with sanctions rules, you must consider ownership and control associated with your customers and business partners, including indirect ownership and control, which can be difficult to determine. Doing business with a sanctioned entity is a clear risk, but entities can also be indirectly sanctioned or sanctioned by extension owing to their ownership or control structure. This presents a real risk too, but one that isn't always as simple to understand.
Identifying different types of sanctioned entity is possible with the right systems and data.
Our white paper outlines best practice in identifying indirect ownership and control.
Various methods are used to circumvent sanctions. Knowing these methods and how to spot them can help you avoid doing business with sanctioned entities.
Some tactics used to evade sanctions are convoluted, including using deceptive shipping practices – and you need to be familiar with these practices too.
Part 4 in the KYC Decoded podcast miniseries on sanctions explores the emerging use of cryptocurrencies to evade sanctions. David Carlisle of blockchain and analytics company Elliptic weighs up whether cryptocurrencies could be enabling sanctions evasion or whether cryptocurrency is just a headline-grabbing distraction from the real challenges.
You can access all episodes in the sanctions miniseries on the Moody’s Analytics KYC website or wherever you get your podcasts.
Innovation in sanctions screening
Alex Pillow, Director of Market Strategy for Moody’s Analytics KYC, has written an account of where sanctions screening began, where it is today, and what companies need to do to prepare for the future. Operations and compliance teams must think about the next generation of regulatory technology, which includes artificial intelligence (AI) and how this technology is changing sanctions screening processes.
What is a PEP?
Politically exposed persons (PEPs) and sanctions are often taken together in compliance data checks. But what are PEPs and why is it important to understand them specifically?
PEPs and sanctioned individuals both pose risks for businesses, but they differ in important ways. Companies can legally transact with PEPs, unlike individuals on a sanctions list.
A PEP is not necessarily doing anything illegal, but their position of influence makes them a potential target for bribery and corruption. Companies must be aware of PEPs in their business network and monitor them to manage potential risk.
Get in touch
That's all for our Q2 roundup. We hope you find this selection of content on sanctions compliance useful. More is available on the PassFort and the Moody’s Analytics KYC sites.
We welcome the opportunity to talk to you about how you manage compliance, including sanctions. If you need help with sanctions screening and risk monitoring let us know – we would love to help.