Sanctions screening is an essential regulatory requirement in the UAE. The failure to conduct sanctions screening can lead to administrative fines and penalties, restrictions and bans on conducting business and reputational loss, to name a few.
To prevent failure to comply with the Sanctions Screening requirements as prescribed under the UAE laws, it is essential for businesses to understand common mistakes in the sanctions screening process, the knowledge of which would help businesses to ensure stricter and better sanctions screening compliance measures.
Some of the common mistakes in sanctions screening are:
1. Not maintaining an updated sanctions list
Sanction lists are dynamic in nature. Regulated entities must ensure that they follow the updated sanctions lists to comply with the TFS requirements in UAE.
2. Not performing ongoing monitoring of a business relationship
It’s essential that the regulated entities perform ongoing monitoring of a business relationship and transactions. Customers, suppliers, and third-parties the entities deal with must be screened on a daily basis.
3. Not making screening a part of the customer onboarding process
Name screening must be an essential element of the customer onboarding process. Without it, the entities will fail to handle true and partial matches and end up violating Targeted Financial Sanctions (TFS) requirements.
4. Not maintaining records for having conducted screening
Regulated entities must perform sanctions screening. Whether manual or automated, screening logs must be maintained to comply with the mandatory record-keeping requirements.
5. Not following regulatory reporting requirements as to FFR, PNMR, or SAR/STR
Regulated entities are required to submit SAR/STR in case of suspicion of money laundering or terrorist financing. Further, all screening hits, if partial, must be reported as a Partial Name Match Report (PNMR), and full matches must be reported as a Funds Freeze Report (FFR).
6. Not recording reasons for false or true matches
The compliance officer must disambiguate the screening matches. If the reasons behind false matches are not recorded, one would have difficulties in proving that he did the proper due diligence.
7. Setting close match threshold too high or too low
Fuzzy matches help identify name variations, and if the close match threshold is kept too low, one ends up with too many false matches, and if it is kept too high, one is at the risk of omitting true matches. A proper balance between the two must be ensured to meet the TFS requirements.
