What is Sanctions Compliance?
Sanctions Compliance refers to the procedures and controls that businesses must implement to ensure they are not conducting transactions or engaging with entities that are subject to sanctions. These sanctions may be imposed by government bodies, such as the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), or international organizations, like the United Nations or the European Union.
The purpose of sanctions is to prevent illegal activities like terrorism financing, human rights abuses, and weapons proliferation by restricting trade and financial interactions with certain individuals, entities, or countries. For businesses, sanctions compliance involves screening customers, suppliers, and transactions against sanction lists and maintaining robust internal processes to detect and prevent violations.
Failure to comply with sanctions regulations can result in severe penalties, including hefty fines and criminal charges. Therefore, businesses need to stay updated on current sanction lists and develop automated compliance systems to reduce risks of accidental violations.
