In her State of the Union address, European Commission President Ursula von der Leyen made it very clear to Vladimir Putin and to Russia that “the sanctions are here to stay”.
Not only was it a stark warning to the Kremlin, but an urgent reminder to all businesses who may lack essential checks and face the very real threat of committing a potential breach.
Before the invasion of Ukraine earlier this year, there were almost 3,000 sanctions already in place against Russia. But as the conflict has escalated, that number has more than doubled, and continues to grow almost on a daily basis.
Governments across the west reacted swiftly, condemning the invasion and placing new restrictions on individuals, entities and their subsidiaries. In an effort to stop oligarchs and designated persons (DPs) laundering money through the UK and potentially helping to fund Putin’s war, the UK government even introduced legislation to limit the deposits held by Russians in UK banks.
As a result, the sanctions list grew exponentially with more than 7,200 individuals and 1,250 entities added. In short, the situation is changing rapidly and firms across all sectors must be vigilant – even if they don’t think they do business with Russia or Russian nationals.
Lack of sanction checks
Worryingly though, our annual EV survey of 500 regulated firms shows a clear lack of sanction checks – even in the current climate.
In fact, almost one in five regulated firms we questioned admitted to not checking new customers against any sanctions or Politically Exposed Person (PEP) lists. Breaking down the responses, property firms were among the biggest offenders as more than a third (39 per cent) made the shocking confession.
For those businesses, reviewing their processes should be matter of real urgency, not just to avoid potential breaches, eye-watering fines and reputational damage, but to avoid putting Ukrainians at risk by giving Russians the green light to circumvent sanctions.
Becoming an enabler
Regulators have made it clear that unintentional breaches are not a valid excuse. Businesses must have robust procedures in place, especially as sanctions increase and exposed people look for more inventive ways to circumvent rules.
One such warning came in a red alert from the Joint Money Laundering Intelligence Taskforce. It explained how DPs were using associates, family members or close contacts to transfer assets and protect their personal and commercial holdings. Without proper due diligence, it warned firms could be seen as enablers and liable to fines or criminal prosecution.
Robust screening
Not only has robust sanction screening become absolutely vital in alerting businesses to potential red flags, but so has real-time monitoring and high-risk country reporting. This is especially important as global sanctions change and existing customers potentially become subject to tighter restrictions.
With the help of electronic verification (EV), a cloud-based AML system like SmartSearch can account for those daily changes, immediately identifying DPs, PEPs, relatives and close associates (RCAs) and automatically triggering enhanced due diligence on any customer matches.
The end result is a faster and much more secure onboarding process, a demonstrably compliant culture and a clear competitive advantage. Best of all, businesses can play an active role in limiting Russian options and helping to bring the conflict in Ukraine to a much-needed conclusion.
