Sanctions and Targeted Financial Sanctions Compliance
Screening and freezing
Sanctions compliance is distinct from AML: it is preventive and prohibition-based, not suspicion-based. Candidates must understand targeted financial sanctions (TFS) - asset freezes and prohibitions on making funds available to designated persons and entities - arising from UN Security Council resolutions and national/regional regimes (e.g., EU, UK, US OFAC).
Know the concepts: designated persons and entities (the lists), asset freeze (funds must be frozen, not returned), prohibition on making funds or economic resources available, ownership and control (a company owned or controlled by a designated person may itself be caught), and strict liability in many regimes - intent is irrelevant.
Understand screening: name and entity screening at onboarding and on an ongoing basis, against consolidated lists; fuzzy matching generates false positives requiring investigation; list updates must be actioned promptly.
Know the difference between sanctions (prohibitions) and AML (suspicion-based reporting). A sanctions hit is not necessarily suspicious, but a suspicious transaction may also be a sanctions issue.
Traps and rule of thumb
Traps: thinking a sanctions match requires suspicion before freezing (it does not - freeze first, then investigate and report as required); assuming a 50% ownership rule is universal (thresholds and control tests vary by regime); and forgetting that indirect ownership and control count. Another trap is believing a delisting is retroactive or that frozen funds can be released without authorisation.
Rule of thumb: screen, freeze, do not tip off, report to the competent authority, and seek a licence before any dealing. When in doubt, freeze and escalate.
Worked example: A corporate customer is 60% owned by an entity on a national sanctions list. Even though the customer's own name is not listed, ownership-based control means the customer's funds should be frozen and the matter reported to the competent authority.