In our first blog of the series , we considered how the last year has dramatically changed the sanctions landscape, and the challenges it presents to business and financial institutions (FIs). With the challenge of meeting sanctions obligations heightened, naturally the vulnerability to malicious acts of sanctions evasions has also grown. However, many might argue the risk of evasion has always been prevalent, with inadequate controls readily exploited by those looking to circumnavigate the regulations.
This blog will consider the growing trends of sanctions evasion, with a particular focus on Russia and North Korea, by highlighting key methodologies that are being used, before providing guidance on how such risks can potentially be mitigated.
Furthermore, FIs should consider expanding the scope of their investigation by working collectively to share data insights. These Public-Private and Private-Private information sharing relationships are an emerging tool that encourages governments and FIs to share case studies and transaction patterns through established intelligence exchange mechanisms. This helps build a more holistic picture of activity by increasing the ability to detect trends or patterns which could denote sanctions evasion. To supplement this, FIs should consider 3rd party data providers who can offer a broad range of bespoke data that can help identify sanctioned activity. This data should include control and ownership structures of sanctioned entities or geographical locations such as cities, towns, regions, or ports within sanctioned jurisdictions.
Evasion will happen. As geo-political rifts around the world continue to grow, the scope of sanctions will escalate in parallel. Businesses and FIs must ensure they take proactive measures to prevent their services and products from becoming instruments of evasion or consequently, face the financial and reputational repercussions. Working cohesively, utilizing expanded data insights, and developing detection capabilities through bespoke analytics are some of the more advanced measures that can be taken as part of a wider and robust sanctions compliance framework to prevent endemic evasion, which could materialize into real world consequences if left unchecked.