What are sanction lists and why are they monitored by companies?

What are sanction lists? What sanctions are imposed in the European Union? Why are some companies regulatory obliged to monitor sanction lists before and during cooperation with a contractor?

Sanction lists — definition

Sanction lists include the individuals, organizations and nations involved in funding or carrying out the following activities:

  • terrorism;
  • drug trafficking;
  • violation of human rights;
  • money laundering;
  • breach of an international agreement;
  • weapons proliferation (proliferation of weapons of mass destruction).

Being placed on any sanction list equals specific prohibitions and restrictions, usually economical ones but not only (we describe all of them in the later part of this article). For example, banks and payment operators mustn’t serve such customers.

European Union, United Nations, as well as countries such as USA, Canada and Australia impose sanctions on all entities that pose a threat to global economies. Criminal activity reduces the stability and confidence in financial systems. The overarching goal of creating and publishing sanctions lists is to combat individuals, entities and governments involved in illegal activities.

The largest and most important sanction lists in the world

Among the numerous sanction lists from around the world, we distinguish 38 of the most important ones:

  • Common Foreign and Security Policy (CFSP) of the European Union (Sanctions EU) — EU sanctions list;
  • Financial Sanctions Files (FSF) — EU sanctions list;
  • EU Sanctions Map European Union — EU sanctions list;
  • Consolidated United Nations Security Council Sanctions List (UN Sanctions List) — UN sanctions list;
  • HR Treasury (HMT) Financial sanctions: Consolidated List of Targets (UK) — UK sanctions list;
  • Current List of designated persons, terrorism and terrorist financing — UK sanctions list;
  • UK Insolvency Disqualified Directors — UK sanctions list;
  • UK OFSI Consolidated List of Targets — UK sanctions list;
  • OFAC Consolidated (non-SDN) List — US sanctions list;
  • OFAC Specially Designated Nationals (SDN) List (U.S. Treasury) — US sanctions list;
  • OFAC Foreign Sanctions Evaders (FSE) List (U.S. Treasury) — US sanctions list;
  • Sectoral Sanctions Identifications (SSI) List — US sanctions list;
  • Palestinian Legislative Council (NS-PLC) list — US sanctions list;
  • US BIS Denied Persons List — US sanctions list;
  • US Trade Consolidated Screening List (CSL) — US sanctions list;
  • The List of Foreign Financial Institutions Subject to Part 561 (the Part 561 List) — US sanctions list;
  • Non-SDN Iranian Sanctions Act (NS-ISA) List — US sanctions list;
  • List of Persons Identified as Blocked Solely Pursuant to Executive Order 13599 (the 13599 List) — US sanctions list;
  • Argentine RePET — Argentina’s sanction list;
  • The Sanctions Consolidated List — Australia’s sanction list;
  • Consolidated List of the National Belgian List and of the List of European Sanctions — Belgium’s sanctions list;
  • Belgian Financial Sanctions — Belgium’s sanctions list;
  • Canadian Listed Terrorist Entities — Canada sanctions list;
  • Canadian Special Economic Measures Act Sanctions — Canada sanctions list;
  • Consolidated Canadian Autonomous Sanctions List— Canada sanctions list;
  • Swiss SECO Sanctions/Embargoes — Switzerland’s sanctions list;
  • French Freezing of Assets — France’s sanctions list;
  • Israel Terrorists Organizations and Unauthorized Associations lists — Israel’s sanctions list;
  • Japan Economic sanctions and list of eligible people — Japan’s sanctions list;
  • Kyrgyz Nation List — Kyrgyzstan’s sanctions list;
  • Kazakh Terror Financing list — Kazakhstan’s sanctions list;;
  • Polish list of persons and entities subject to sanctions — Poland’s sanctions list;
  • Rosfinmonitoring WMD-related entities — Russia’s sanctions list;
  • Singapore Targeted Financial Sanctions — Singapur’s sanctions list;
  • Ukraine National Security Sanctions — Ukraine’s sanctions list;
  • Ukraine SFMS Blacklist — Ukraine’s sanctions list;
  • Ukraine NABC Sanctions Tracker — Ukraine’s sanctions list;
  • South African Targeted Financial Sanctions — South African Sanctions List.

AML tools — data platforms and APIs that can be found on the RegTech market, very often contain only some of these lists. The exception is our Transparent Data Sanctions Lists API that covers them all real-time. In total, the database of records from all these lists is over 48 thousand entities. You can learn more about our solution & contact us here: https://transparentdata.pl/en/

Main types of sanctions imposed by the EU and UN

Types of sanctions imposed by the European Union and United Nations include:

  • general sanctions — also known as diplomatic sanctions; concern suspension of diplomatic relations (expulsion of diplomats, suspension of official visits and cooperation, boycott of sports and cultural events);
  • specific sanctions — to impose these sanctions, the UN or the EU need a legal basis in the treaties; these types of sanctions include:
  • arms embargo;
  • travel bans;
  • freezing of assets (persons and entities);
  • economic sanctions (it is forbidden to import or export the indicated goods, as well as investing and providing specific services).

Sanctions may be imposed on the initiative of the United Nations or European Union, e.g. as a UN Security Council resolution. The European Union is committed to implementing all sanctions enacted by the United Nations Security Council and to maintaining a permanent dialogue to coordinate actions. The EU can also strengthen UN sanctions and introduce additional security measures.

Examples of sanctions imposed in Europe

At the end of February 2021 European Union Council extended detailed sanctions imposed on Belarus, e.g. ban on traveling to the EU and freezing the assets of 88 people, including Alexander Lukashenko, until February 28, 2022. Sanctions were imposed after rigged elections, repressions and intimidation of peaceful demonstrators, opposition activists and journalists by Lukashenko’s regime. This means that until February 28, 2022, persons and entities from UE cannot directly or indirectly cooperate with 7 entities and 88 persons subject to sanctions.

In Belarus, the sale, supply, transfer or export of dual-use goods and technologies is prohibited (including potassium chloride, which can be used as a chemical weapon). This sanction applies to every person, entity and body in Belarus.

Another example is Syria. Investments in the oil and gas industry and production of electricity are prohibited on the territory of Syria. The asset freeze sanction was imposed on selected Syrians — this means that it is forbidden to cooperate (directly or indirectly) with these entities.

Why do companies check the sanction lists?

In all EU countries, companies involved in financial transactions must comply with the AML Directive and check if their clients appear on the sanction lists. It’s a regulatory obligation. New customers are checked during the account opening process, existing customers at a specified interval after the onboarding process. If a potential client is on the sanction lists (does not pass the AML verification) the company absolutely will not cooperate with such a contractor. Strict penalties are imposed on companies for breaking sanctions.

Sanctions lists — contractor verification

Sanctions imposed to enhance a country’s financial stability have grown in importance thanks to anti-money laundering laws and regulations. The acts filled the legal void that until recently allowed for morally questionable transactions. According to the report of the General Inspector of Financial Information (GIFI), the number of reported suspicions of financial crimes in Poland amounted to a total of approx. PLN 15 billion in 2020. Such a large sum per year shows that this problem is rightly monitored.

Rules for checking sanctions lists (AML compliance)

All obligated institutions in EU countries, in accordance with the AML directive, must check their new client’s presence on sanction lists before official start of cooperation and verify current clients at least once every two years. The obligated institutions now also include entrepreneurs providing services based on the preparation of declarations, keeping tax books, providing advice, giving opinions or explaining issues in the field of tax and customs law, as well as auction houses or art galleries that deal with trade in works of art (you can read more about it HERE).

Persons and entities appearing on the sanctions lists are a threat or a potential threat to international peace and security due to the possibility of terrorist attacks. In Poland, transactions involving an entity that appears on the sanctions list must be reported to the General Inspector of Financial Information (GIFI) due to the fact that each such transaction may be related to money laundering or terrorist financing.

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