Sanctions screening is the process of checking individuals, entities and transactions against global sanctions lists to determine whether they are subject to legal restrictions or prohibitions. It is a core requirement of Anti-Money Laundering (AML) and Know Your Customer (KYC) compliance programs and is essential for ensuring that organizations do not engage in business with sanctioned parties.

Sanctions are imposed by governments and international bodies to address threats to national security, foreign policy or international law. Commonly referenced sanctions lists include those issued by the U.S. Office of Foreign Assets Control (OFAC), the United Nations (UN), the European Union (EU) and His Majesty’s Treasury (HMT) in the UK. Financial institutions and regulated entities are required to screen customers and counterparties against these lists during onboarding and on an ongoing basis.

A robust sanctions screening process involves automated tools that compare customer data against updated sanctions databases, detect potential matches and generate alerts for further investigation. It should clearly define when screening must occur, how results and audit trails are documented and how potential matches (or red flags) are reviewed, escalated and reported.

Effective sanctions screening helps organizations mitigate legal, financial and reputational risk by ensuring compliance with international regulations and preventing transactions that could violate sanctions laws. Regularly updating sanctions data, applying a risk-based approach and maintaining clear internal protocols are essential to maintaining a strong sanctions compliance framework.