A recent round of US sanctions prohibits companies from doing business in Crimea, annexed by Russia last spring, and Europe just banned travel businesses from operating there. Meanwhile, the Republican-controlled Congress has vowed to impose additional sanctions on Iran, which President Obama opposes, saying they would jeopardize ongoing negotiations. Given that those are but a few of the current sanctions globally, how do treasury executives of multinational companies monitor and comply with the ever-changing prohibitions?
One potential solution has recently been expanded by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging service, which announced January 13, 2015 that its Sanctions Screening service now supports all messages used in financial transactions, regardless of format or financial network.
“The extended service also enables greater flexibility and back-office integration, addressing the needs of mid-sized banks and other users that have more complex business and operational requirements,” SWIFT said in January 13 announcement.
Those “other users” include nonfinancial corporates, which may already use SWIFT’s messaging service.
Transactions can be screened currently against 35 of the most important sanction lists, including lists from the US Office of Foreign Assets Control (OFAC), the UK’s HM Treasury, the Hong Kong Monetary Authority, and the relevant authorities in the European Union, and Singapore, Australia and New Zealand. SWIFT updates the lists at no additional charge, and it can extend the service to additional lists upon request.
“Extending the service to all transaction types makes it more attractive to corporates, who can connect to it directly or through a SWIFT service bureau,” said Nicolas Stuckens, head of sanctions compliance services at SWIFT. He added that typical transactions corporates would screen include trade-related messages and bank payment instructions.
“We have used Sanctions Screening since 2012 and greatly value the peace of mind it provides as a key part of our sanctions compliance program,” said Christine Coffin, head of back office at Paris-based CPoR Devises SA, in a statement. “We have tested the extended service from SWIFT and are very pleased that we can now count on Sanctions Screening for our SEPA (single Euro payments area) payments.”
CPoR Devises offers services to aid financial institutions and large companies to manage gold and currencies; it also trains clients to detect counterfeit notes. SEPA is a payment-integration initiative by the European Union to simplify bank transfers denominated in Euros.
Penalties for violating sanctions can be substantial. Criminal penalties for willful violations can include fines up to $20 million and imprisonment of up to 30 years. Civil penalties for violations of the Trading With the Enemy Act can be as high as $65,000 for each violation. Civil penalties for violations of the International Emergency Economic Powers Act may be as much as $250,000 or twice the amount of the underlying transaction for each violation.
To ensure the Sanctions Screening service does overlook sanctions, resulting in penalties, SWIFT regularly monitors the filter’s effectiveness and makes sure lists are error-free and up-to-date. The service screens transactions against the sanction lists and notifies users when a suspicious message is identified.
“Not every message that is flagged by the service actually involves an illicit transaction, but all need to be investigated and acted upon by the user,” Mr. Stuckens said. “The user remains responsible for investigating such messages and stopping the transaction if it proves to involve a sanctioned entity or individual.”