There’s no room for errors or delays in adapting to changing sanctions regimes. For financial institutions, even a brief lapse in updates can lead to severe legal, financial, and reputational consequences. 

Screening for sanctions is a regulatory requirement in most jurisdictions. In countries like the United States (US) and the United Kingdom (UK), breaches are treated as criminal offences. More recently, the European Union (EU) introduced new rules harmonising penalties for such violations across member states. 

It’s no surprise, then, that firms are scrambling to stay on top of the surge in sanction updates and the increasing compliance demands. 

The wave of Russia-related measures since 2022, which established Russia as the most heavily sanctioned nation by list-based criteria, has also shown how complex and fast these measures can be. Financial institutions need real-time solutions that simplify screening processes, improve list management, and ensure compliance in a fast-paced environment.

Managing the Pressure of Rapid Sanctions Updates

Responding to overnight sanctions changes

Sanctions are introduced quickly, often with little or no warning. To exemplify the sustained high volumes of measures, the US Office of Foreign Assets Control (OFAC) announced its largest-ever package of sanctions against Russia earlier this year.

Geopolitical shifts, regulatory changes, and enforcement actions trigger these updates, which can occur daily. Recent actions, such as ongoing responses to human rights concerns in regions like Georgia, continue to spur fresh sanctions. Meanwhile, regulatory updates in the UK expanded the definition of ownership and control to include entities indirectly owned or controlled by designated individuals under restrictions. These frequent changes pressure financial institutions to track updates and ensure compliance with ever-shifting requirements.

In an effort to counter evasion tactics, lists increasingly target intermediaries and networks designed to circumvent restrictions. Guidance by the G7 outlines the need for vigilance against new evasion techniques and deceptive practices. A recent international investigation illustrating the scope of these networks uncovered a sprawling, complex criminal operation across 30 countries, including in the Middle East and in South America.

Facing high stakes for compliance 

For financial institutions, the consequences of failing to keep up with these quickly changing restrictive measures are significant. In 2023, OFAC imposed over $1.5 billion in penalties, marking the highest total collected in a single calendar year. 

Similarly, the UK Office of Financial Sanctions Implementation (OFSI) reported a sharp increase in suspected breaches, documenting 473 cases, up from 147 incidents in 2021 and 2022, excluding oil price caps and counter-terrorism violations. 

These numbers highlight the importance of using strong sanctions screening and sanctions list management systems to avoid penalties. 

Sanctions Are Getting More Complex

Expanding measures and broader restrictions 

As sanctions grow in volume, they also become more intricate, covering new areas and introducing expansive measures. Recent additions target cryptocurrency wallets, which are now subject to specific restrictions and reflect a broader trend of including digital assets in sanctions lists. 

Entire territories, such as Crimea, Sevastopol, Donetsk, and Luhansk, are now subject to comprehensive sanctions, requiring compliance teams to monitor for geographic ties within these regions. Sweeping measures, such as SWIFT bans and restrictions on services like accounting and consultancy, further increase the scope of compliance efforts. 

These restrictions require teams to track a wider range of data points, including indirect links to designated entities through intermediaries or third parties. Additionally, sectoral sanctions targeting entire industries or prohibiting specific activities — rather than individual named entities — add another layer of complexity. These measures challenge compliance teams to navigate nuanced regulations effectively.

Ownership challenges

Opaque ownership structures, like shell companies, trusts, and proxies, obscure links to sanctioned entities. Enforcement bodies continue to identify these strategies as significant hurdles in determining direct, indirect and beneficial ownership. Targeted businesses exploit these arrangements, restructuring frequently to evade detection. Compliance teams must untangle these connections quickly to maintain enforcement and prevent gaps. 

Real-time access to sanctions data is indispensable in addressing these complexities. Current, accurate data allows compliance systems to reflect the latest updates, minimising delays and errors in response to fast-changing frameworks.

Strengthening Compliance with Real-Time Data

Meeting regulatory expectations

Regulators expect financial institutions to process sanctions updates without delay, making real-time data essential for compliance. The Single Euro Payments Area (SEPA) Instant Payment Regulation (IPR), effective January 2025, standardises instant payments across Europe and highlights the urgent need for immediate access to updated sanctions lists to stay aligned with EU regulations.

This regulation mandates daily checks of clients against regulatory lists rather than screening transactions individually, emphasising the near-immediate incorporation of EU sanctions into compliance systems. 

Additionally, because entities named on EU restriction lists first appear in the EU Journal before making it to the official EU Consolidated List, financial institutions must monitor the EU Journal for any new regulations related to restricted measures and asset freezes. To maintain compliance, firms must immediately integrate these updates, using tools that can automate their inclusion seamlessly. 

Traditional methods can’t keep up

Traditional, legacy systems often rely on slow, manual workflows that struggle to keep pace with the rapid evolution of sanctions lists. Once considered the industry standard, these systems now lead to higher costs, increased risk of human error, and greater demands on already strained compliance teams. To address these challenges, modern technology such as large language models (LLMs), can extract relevant information from sources like the EU Journal to update lists quickly and accurately.

In today’s era of real-time payments, even minor compliance gaps can have severe consequences. The operational inefficiencies inherent in traditional systems can cause delays that expose firms to penalties and reputational risks. Using up-to-date sanctions data is critical for mitigating risks and ensuring compliance.

Streamlining compliance workflows

Real-time, deduplicated data helps compliance teams focus on genuine risks by reducing redundant alerts and improving resource allocation. It also ensures that delisted entities are taken out of workflows when appropriate,  allowing teams to concentrate on more critical tasks. 

In 2023, the US delisted 422 individuals from its Specially Designated Nationals (SDN) list — nearly double the previous year’s delistings. Many pertained to inactive persons connected to drug trafficking. Quickly adjusting workflows to reflect these changes while aligning with a firm's risk appetite prevents unnecessary monitoring and reporting, which can detract from higher-priority concerns. Efficient compliance systems are crucial for adapting to these changes without adding an extra operational burden.

For compliance teams, having access to information in a single, intuitive dashboard and reporting interface is crucial for better decision-making, efficiency, and operational control. Modern tools allow for the creation of tailored lists from various watchlist data feeds and ensure traceability for auditing, strengthening organisational integrity.

How Facctum Can Help

Facctum simplifies sanctions screening with its advanced compliance platform. Our watchlist management solution, FacctList, integrates data from global regulators and provides updates every five minutes, ensuring you stay ahead of evolving requirements. By automating deduplication and reconciliation, FacctList eliminates redundant data, reduces false positives, and streamlines workflows — cutting operational costs.

In response to recent surges in sanctions, Facctum provides the agility to adapt quickly, keeping your operations compliant. Our platform provides a smooth transition, integrating seamlessly with your existing systems and facilitating data migration without disrupting your ongoing business operations.

Tailored to your needs, Facctum’s Watchlist Management allows for customised watchlists and output formats, easily fitting into your existing compliance systems within 4–6 weeks.

With the new SEPA IPR requirements, FacctList provides monitoring of real-time EU sanctions. Continuous updates from sources like the EU Journal allow for swift action on announcements, even before consolidated reports are available. 

Eliminate the lag in sanctions data and stay ahead of regulatory demands. 

Contact us to learn how Facctum can strengthen your sanctions screening and watchlist management with real-time solutions: sales@facctum.com.