What is a Sanctions List?

What is a Sanctions List

Along with government officials, international authorities publish sanction lists to combat individuals engaged in any illegal activities. A Sanction list incorporates sanctioned individuals, governments, or commercial organizations. Firms, government officials, as well as individual entities, are enlisted into this category as these individuals or organizations pose a high risk to the business or the economy of the country or world as a whole.

Economic sanctions are undoubtedly an essential tool to fight against financial crime such as anti-money laundering. If such sanction lists are not followed or are breached, one may face severe consequences under AML/CFT regulations. Hence, business organizations have to apply sanction control to their clients while establishing business relationships with any customer. The process of screening the sanctioned list is one of the steps in the customer due diligence (CDD) procedures.

Business enterprises should also implement sanction control to their existing clients at a certain level after completing the customer onboarding process. It is simply because the risk level of clients may change over time, and it is a wise thing to monitor the relationships closely and continuously. Hence, organizations must carefully consider the screening of the Sanction List.

Check out Guidance for Licensed Financial Institutions on the Implementation of Targeted Financial Sanctions issued by the Central Bank of UAE

This article articulates detailed information about sanctions lists necessary for the business organization to be aware of.

Sanctions List Meaning

Sanctions List flags certain individuals, entities, and countries to fight against financial crime. Governments maintain a Sanction List across the globe to prohibit business transactions with such individuals, entities, and countries. 

Such individuals and entities are added to the sanction list for various reasons, including terrorism, war crimes, and the proliferation of weapons of mass destruction.

Sanction List meaning in simplest terms is, a publicly listed directory of entities and individuals upon whom economic or legal restrictions have been imposed. 

What is Sanction in AML? - Anti-Money Laundering Sanction list

Financial authorities and governments across the world maintain a list of sanctions. These lists are available in the public domain. Here are a few lists necessary for a better understanding of the concept:

Who are all on a sanctions list?

Sanctions might be leveled as a result of explicit or illegal activities or in order to achieve a foreign policy or a diplomatic aim. These sanctioned lists are usually passed by the act of an international authority or by governments—for instance, the United Nations Security Council Resolution.

Several sanctions lists incorporate targets involved in the financing of criminal or terrorist activities. Sanctions screening lists basically include organizations, individuals, or the entire nation engaged in severe crime like terrorist financing.

Here are a few activities that a sanction list claims to counter.

Compliance. Trust. Transparancy

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What is the purpose of AML sanction lists?

Financial crimes exponentially reduce the stability of all the countries’ economies and confidence in the economic systems. Governments of several countries impose sanctions on several individuals and nations who are more prone to the risk to their country’s economy and organizations.

Sanction lists have been emphasized under anti-money laundering laws or regulations. Enterprises that have to comply with various international laws follow this list on a regular basis. People who have been mentioned in the sanctions lists are prohibited from entering into any financial transactions. Sanctions that are imposed accurately aim to increase financial stability and confidence.

The other principle upon which such Sanction List is based is the “conflict of interest.” While every country wants to be successful in implementing their foreign policies, they might experience hardships with many other countries. Some of these problems or difficulties cannot be solved; countries have to get on the middle ground and find the solution by imposing international sanctions on the corresponding countries. Restrictions on trade are one of the classic examples of this. As a result of these sanctions, companies and citizens are restricted in cooperating with the respective country. Here are few sanctions imposed by many countries.

United Arab Emirates AML Sanctions List

The UAE is a member of three main regional bodies that issue sanctions – the Arab League, the Terrorist Financing Targeting Centre (‘TFTC’), and the Gulf Cooperation Council (‘GCC’).

Additionally, the UAE maintains two main lists of sanctioned individuals and entities –

a. The local list – This list consists of local terrorism list issued pursuant to Anti-Terrorism Law;
b. Sanctions list – This consists of a sanction list issued by the UN Security Council.

Sanction lists screening for AML compliance

Sanctions list screening is again one of the essential aspects of Customer Due Diligence (CDD) under Anti-money Laundering regulations. Business houses have to implement AML risk assessment throughout the client onboarding and client monitoring processes. Anti-money laundering regulators impose heavy AML fines on organizations that fail miserably to comply with all the CDD Processes.

AML UAE provides Anti-Money Laundering Consulting Services to help companies adhere to the requirements of the AML Laws in UAE.

Check out Circular 1 of 2022: Implementation of Targeted Financial Sanctions on UNSCRs 1718 (2006) and 2231 (2015)

Final words

Hope this article has helped you to understand the meaning, need, and importance of Sanction Lists for any business organization. However, you may need an expert's help, like us, to implement the process for screening the Sanction List to adhere to the AML/CFT regulations.

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FAQs About Sanctions List

A sanction means a ban or restriction of specific individuals, countries, or entities directly or indirectly engaged in crimes and illegal activities.  

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About the Author

Pathik Shah

CISA, FCA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a multi-disciplinary professional with more than 22 years of experience in compliance, risk management, accounting, system audits, IT consultancy, and digital marketing. He has extensive knowledge of Anti-Money Laundering rules and regulations, and he helps companies comply with legal requirements. Pathik also helps companies generate value from their IT investments.