What is Sanctions Screening?
Let’s start by defining what a sanctions screening is. The process requires organizations to screen individuals and companies to ensure that they are not on a designated list of entities that you cannot work with.
A sanction is a measure put in place as a preventative measure or to change certain behaviors. Generally, they relate to high-risk groups or individuals and aim to prohibit illegal activities from occurring in their jurisdictions.
As such, a sanctions list contains data about the countries, groups, and organizations that are restricted. These lists are managed by international regulators and other government authorities like the EU, UN, and OFAC in the United States. That means several sanctioning bodies maintain their own databases, and you must take care to comply with the regional restrictions where you do business.
You can manually perform sanctions screenings by inputting the customer data into an online search or database, but most businesses rely on automatic systems that process the information for them. Organizations must check the lists that apply to them based on where they trade, the currencies they use, and the partnerships they have in other areas.
The sanctions can extend further than the entity listed, too – they can apply to subsidiaries or other groups controlled by them. If a customer is not on a sanctions list but has a relationship with someone that is, they could present a higher risk.
Sanctions Screening in the Mining Industry
Although sanctions screenings tend to be looked at as something that financial institutions deal with, they apply to a broad variety of sectors and industries – including mining. While sanctions rarely target companies in the mining sector directly, they must still consider compliance.
Sanctions against mining date back to the 1960s as part of UN anti-apartheid efforts. Other sanctions introduced in the 1990s addressed blood diamonds mined in various African states.
These sanctions are not just a thing of the past, though. For example, in 2003, the US imposed sanctions on Burmese mining companies. Likewise, the US government implemented a ban on trading precious metals, aluminum, graphite, and more with Iran in 2017.
If you are a mining company that conducts business with one of these target countries, you must exercise caution and ensure that you follow all applicable laws. Even if your organization is not directly mining in the country, you should still consider the flow of funds in or out.
The mining industry can also be impacted by sanctions not directly applied to the sector. If a regulator identifies a bank that is involved with money laundering or terrorist financing, they may order its liquidation. The mining company would be at risk of losing all the funds that were kept in that bank account. This would lead to an interruption in their operations and cause cash flow issues.
Another scenario could exist where a mining business cannot access cargo insurance for shipments coming from or going to a target country.
Simply put, a mining company needs to have a risk assessment team that performs sanctions screenings and mitigates some of these non-compliance risks.
How to Comply with Sanctions Regulations
So, how can you comply with sanctions regulations so that you can protect the integrity of your business and avoid costly fines and penalties?
The key is to implement an effective sanctions screening process within your organization. Businesses must have controls and know your customer process in place so that they can appropriately identify and screen their clients.
Failure to perform sanctions screenings – and use a risk-based approach to address findings – can result in significant fines and penalties. In 2019, OFAC assessed more than $1.2 billion in fines to companies that did not comply with export controls.
To avoid non-compliance, you should carefully review the scope of their regulations and how it applies to your business. For the most part, that means having a sanctions risk assessment and screening policy, enforcing compliance by counter-parties, and ongoing monitoring.
Your sanctions screening process should have a top-down approach when it comes to compliance. Corporate leaders must understand what is required and ensure that it flows through to the rest of the organization.
One way to do this is to maintain updated policies and procedures. The regulatory environment is constantly evolving, and that means your sanctions screening process will need to keep up. Ensure that you are using technology that allows you to pull the most recent watch lists and sanctions databases.
You must notify your employees of these policies and procedures, as well as implement appropriate training to help them understand their compliance obligations.
Best Practices for the Sanctions Screening Process
Now that you understand what sanctions screenings are and how they can affect the mining industry, let’s review some of the best practices you should implement.
First, you must ensure that the data you use to perform the screenings is accurate and up to date. If your database is incomplete or inaccurate, you increase the risk of obtaining false positives or missing a sanction altogether.
It helps to use data enrichment software that can help you append secondary identifiers. By including data like an address, date of birth, and more you will have more accurate results and reduce the time it takes to find a single match.
Similarly, you should leverage technology wherever possible. Sanctions screening software like sanctions.io can help you handle a large volume of data, which is essential to scaling your business while remaining compliant. They can also automate the process for you so that you need fewer employees to support the process and can minimize the risk of human error.
The technology you choose should be configurable to your industry and relevant regulatory authorities – this is a key functionality to maintain the risk-based approach.
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