Targeted Financial Sanctions in UAE: Challenges of Sanction Screening
Ensuring compliance with Targeted Financial Sanctions (TFS) requirements in the UAE is critical for financial institutions and Designated non-Financial Businesses & Professions (DNFBPs). However, the sanctions landscape is a minefield for FIs & DNFBPs that can be navigated with the help of AML consultants in Dubai. The most critical and complex part of the TFS requirement is the sanction screening, which may pose certain challenges to the FIs and DNFBPs.
FIs and DNFBPs such as real estate agents, dealers of precious metals and precious stones, auditors and trust & company service providers should carry out sanctions screening during the customer onboarding process. However, sanctions are riddled with many complexities and challenges that are discussed in the following article:
The sanctions landscape is in a flux
Governments and other political bodies across the world issue sanctions as a foreign policy strategy against targets such as individuals, businesses, organisations and government agencies. You may remember the recent incident where Russia has been sanctioned over the Ukraine War. However, sanctions are issued and removed constantly. It means the sanctions list is updated continuously. New lists will be created as a result of shifting political developments. Such lists also need to be reviewed, updated, and monitored by the FIs and DNFBPs.
Apart from governments, organisations such as the United Nations, the European Union (EU), and the Office of Foreign Assets Controls (OFAC) issue sanctions against a wide range of targets. This situation is also challenging for you as you need to be aware of the hundreds of organizations in multiple regions that rapidly update their respective sanctions lists. This challenge can be addressed by building a system to keep an eye on new sanctions that are potentially coming. AML consultants in Dubai can help you with this.
Sanctions screening is complicated
FIs and DNFBPs may find it a complex process to keep track of businesses and entities that are on the sanctions list. Keeping a tab on parties that are connected to those on the sanctioned list presents yet another challenge. Your company will be required to monitor Politically Exposed Persons (PEP) as part of the sanctions screening process. This is a complex process as the PEPs may not be sanctioned directly but they bear the risk of working with or associated closely with individuals who are on the sanctions lists.
Having PEPs as customers can increase the risk of money laundering in your organisation as they may be asked to launder money on behalf of a sanctioned individual. PEPs are also vulnerable to corruption as they have access to and the ability to influence certain activities. PEPs need to be monitored in the wake of the acceptance gained by cryptocurrencies recently as you will need to be aware of how these funds are used and how sanction rules take effect. The solution to this challenge is to ensure you are meeting the regulator’s expectations. This goal can be achieved by working with AML consultants in Dubai.
Ensure you do not facilitate sanctioned activities
Understanding the AML compliance requirements and adjusting your operations in line with them will not suffice. FIs and DNFBPs need to proactively conduct risk assessments and ensure your company is not unknowingly facilitating or supporting any sanctioned activities. Bad actors can always find opportunities to use your products or services to facilitate money laundering and terrorist financing activities.
You need to always identify such opportunities existing in your organisation by performing robust risk assessments. To avoid such risks, you may need to take your screening activities to the next level in line with the risks identified during your organization’s risk assessment. You must employ basic controls and screening to strengthen your risk management approach.
Lack of Proper Sanctions Data
Sanction screening becomes effective only when you have access to relevant data. You need to have quick and easy access to comprehensive information on sanction lists. DNFBPs, FIs and other designated entities cannot afford to miss any update in the sanctions lists. Therefore, it is imperative for you to have access to real-time changes in the sanction screening guidelines.
The multitude of sanctioning bodies
The number of bodies that issue sanction lists keep on expanding. It means companies need to keep track of multiple, sometimes conflicting sanctions regimes. They need to exercise additional caution in monitoring watchlists and understand which watchlists to comply with. To avoid this complexity, you can use sanctions screening systems that will help you understand existing sanctions, review numerous watchlists, and outline how existing sanctions impact your operations.
Consult with the Best AML Consultants
As sanction screening is mandatory for FIs, DNFBPs and other designated entities, a proper TFS strategy must be developed to address the pressing challenges. It would be advisable to rely on AML consultants in Dubai such as Jitendra Chartered Accountants (JCA) to ensure sanction screening compliance. JCA provides bespoke AML compliance services in Dubai to enable companies to fully comply with TFS and AML-CFT requirements. Consult JCA’s AML services to keep abreast of all the latest developments in the global sanction screening guidelines and keep your business in line with them.