In today’s hyper-connected financial ecosystem, moving money across borders takes just a few seconds. But with that speed comes risk – from money laundering and terrorist financing to geopolitical violations and reputational damage. That’s where sanctions checks come in.
Whether you’re a fintech startup, a global bank, or a regulated business expanding internationally, sanctions screening is no longer optional. It’s a core compliance obligation that protects organizations from severe penalties and safeguards the global financial system.
In this article, we’ll break down what sanctions checks are, why they are important, what needs to be screened, common challenges and some of the best practices. Let’s start at the beginning.
What Are Sanctions and How Do They Work?
Sanctions are political and economic tools used by governments and international bodies to influence the behaviour of states, organizations, or individuals without resorting to armed conflict. At their core, sanctions are restrictive measures that limit or prohibit certain types of economic activity, financial transactions, trade relationships, or access to resources. They are typically imposed to address threats to international peace and security, violations of international law, human rights abuses, terrorism, nuclear proliferation, corruption, or other destabilizing activities. Rather than using military force, policymakers rely on sanctions as a means of coercion, deterrence, signalling disapproval, or compelling a change in conduct.
Major sanctioning authorities include the United Nations Security Council (UNSC), which can adopt binding measures on member states; the Office of Foreign Assets Control (OFAC) within the U.S. Department of the Treasury; the European Union (EU); the United Kingdom’s His Majesty’s Treasury (HMT) and many others. These bodies maintain and regularly update their official sanctions lists and regulatory frameworks that define who or what is restricted, what activities are prohibited, and what penalties apply in the case of non-compliance.
Violating sanctions regulations can result in massive fines. For example, OFAC enforcement actions have resulted in penalties reaching hundreds of millions of dollars.
Picture 1 – OFAC fined GVA Capital for Sanctions Violations Back in 2025 (Source: Compliance Week)
What Types of Sanctions There Are?
Sanctions are commonly classified in two simple ways:
- By scope, sanctions may be comprehensive, targeted, or sectoral. Comprehensive sanctions apply broadly to an entire country or regime and restrict most forms of economic and financial interaction. Targeted (or “smart”) sanctions focus on specific individuals, entities, or organizations, typically involving asset freezes and prohibitions on making funds available to them. Sectoral sanctions fall between these two approaches: rather than banning all activity, they restrict certain types of transactions within particular industries, such as finance, energy, or defence.
Picture 2 – North Korea being additionally sanctioned after the 6th Nuclear test (Source: BBC)
- By type of restriction, sanctions are categorized according to what they prohibit. Financial sanctions restrict access to funds, assets, and financial services, often through asset freezes or transaction bans. Trade sanctions limit the export or import of goods and technology. Travel bans prevent designated individuals from entering or transiting certain countries. Arms embargoes prohibit the transfer of military equipment or assistance, while service restrictions bar the provision of specified professional or commercial services. Together, these classifications provide a clear and practical framework for understanding how sanctions operate in practice.
Picture 3 – EU Sanctions Map Showing List of Countries with Restrictive Measures (Source: Sanctionsmap.eu)
What Are Sanctions Checks and Why They Are Important?
Sanctions checks (also called sanctions screening) are compliance procedures used to ensure that individuals, entities, or transactions are not connected to sanctioned parties. During this process the customer or transaction data is compared against these lists to determine whether there is a match. If a match is found, the organization must take appropriate action – which may include freezing assets, rejecting transactions, or reporting to authorities.
Sanctions compliance isn’t just about checking a regulatory box. It protects the business from serious consequences, like:
- Regulatory Penalties – regulators expect companies to have robust screening systems. A weak compliance framework is often considered an aggravating factor in enforcement actions.
- Criminal Liability – in certain jurisdictions, sanctions violations can trigger criminal charges for both companies and individuals.
- Reputational Damage – being associated with sanctioned individuals or entities can destroy trust with customers, partners, and investors.
How Sanctions Checks Connect with KYC Programs
Sanctions screening is a critical component of a broader Know Your Customer (KYC) framework. KYC establishes who your customer is, while sanctions screening determines whether that customer is legally permissible to do business with. Without accurate KYC data, sanctions checks may become ineffective.
For example, if you don’t collect enough information, you may miss beneficial owners that are sanctioned individuals or sanctioned companies hiding somewhere in a corporate structure. Most companies define sanctioned individuals or entities to be outside of their risk appetite; therefore, sanctions checks are not standalone – they are embedded within the compliance lifecycle.
When Do Sanctions Checks Need to Be Conducted?
Sanctions screening is not a one-time exercise. It must occur at multiple stages:
- During Onboarding – before establishing a business relationship, the companies must screen the name of the individual customer, while for legal entities the company needs to screen the legal entity name (including their trading name, for example Alphabet Inc is the legal entity name, but they are also commonly referred to as Google), intermediaries in the corporate structure, directors, beneficial owners or other key controllers (e.g., board of directors). Also, if the services are provided remotely, the financial institution needs to check the customer’s IP address location to check if it is from a sanctioned country or not.
- Before Processing Transactions – it is common knowledge that financial institutions need to conduct real-time transaction screening to ensure that funds are not going to or coming from sanctioned individuals or financial institutions that are sanctioned (also let’s not forget the customer’s IP location!). In addition, the payment reference field also needs to be checked against the sanctions (e.g., in case the name of a sanctioned vessel or Aircraft tail number is mentioned).
- Ongoing Monitoring – sanctions lists are updated frequently with new names being added and others being removed. The existing low risk customer today can become a sanctioned individual tomorrow with a prohibited risk level. Therefore, it is important to periodically re-screen the existing customers and make sure that risk remains unchanged.
- Trigger Events – re-screening should occur when additional information is obtained about the customer (e.g., the existing customer with a driver’s license issued in the United Kingdom has a dual citizenship and provided a valid passport issued in Iran), or in situations where the Beneficial Ownership changes and it is unclear who should be screened (e.g., new beneficial owners are added or new intermediary companies appear in the structure).
Most Common Challenges in Sanctions Screening
While checking for sanctions might appear as binary process (it is either a match or no match), the whole screening process involves certain complexities. Here are the most common difficulties organizations might face:
- Common Names – in some cultures there are very commonly used names (e.g., Mohammed, Vladimir etc.) that can result in a 100% name match, but they might have completely different Date of Birth. Also, let’s not forget different name spellings (e.g., Dmitri, Dmitry or Dimitry), or other traditions (e.g., same person in the United States can be referred to as Robert, Bob, Bobby, Rob).
- Untailored Sanctions Screening Settings – If the screening settings are not setup correctly, then it may overwhelm compliance teams with too many false positives (besides providing the negative customer experience). A risk-based approach should be used where only the real potential matches are submitted for compliance team’s review.
- Rapidly Changing Lists – sanctions programs evolve quickly, especially during geopolitical crises, therefore it is important that the existing screening databases are updated in real time.
- Limited Data – some sanctioned individuals have very limited data provided about them, which can complicate the false matching process. For example, below is information about one of the Sanctioned individuals in the EU Sanctions list, which contains geography name and job title.
Picture 4 – information provided on one of the Sanctioned individuals in the EU’s Consolidated Financial Sanctions List (Source: European Comission)
- Data Quality Issues – incomplete or inaccurate customer data reduces screening effectiveness. For example, inconsistent date of birth formatting might create risk by inverting the numbers – YYYY/MM/DD vs YYYY/DD/MM.
- Complex Beneficial Ownership Structures – some corporate structures can obscure beneficial owners (e.g., by issuing bearer shares), or different types of stocks being issued within the same company (e.g., Alphabet has 3 different types of stocks, but Class B shares have higher voting power compared to regular stocks)
Picture 5 – Article in Investopedia on Alphabet’s stock Difference (Source: Investopedia)
- Multi-Jurisdictional Complexity – a company operating globally (or even within the European Union) may be subject to multiple sanctions regimes simultaneously.
- Manual Processes – relying on manual checks is not scalable and increases human error risk.
Best Practices to Avoid Common Pitfalls
To build an effective sanctions screening framework, organizations should consider adopting the following best practices:
- Maintain Up-to-Date Sanctions Lists – ensure you are screening against the most recent sanctions lists or simply get a vendor that does it for your company.
- Screen Only Against the Relevant Sanctions Lists – typically the local AML laws define what Sanctions lists the institutions need to screen against to meet the minimum requirements. Also, there are some best practises (e.g., screen against the OFAC sanctions lists when it is not legally required to). Also, the Russian government has their own Sanctions lists, but you don’t operate in Russia, then there is no point to screen against them.
- Implement Risk-Based Screening – not all customers pose equal risk and not all of them need to be reviewed manually.
- Ensure Data Quality and Standardization – high-quality KYC data reduces false positives and improves screening accuracy.
- Use Appropriately Configured Matching Logic – invest in technology that helps to automate this process and reduce alert fatigue and improve precision.
- Maintain Clear Screening Procedures – have documents that explain when the screening is being performed and how the potential matches are being reviewed, evaluated, documented and need to be escalated for Money Laundering Reporting Officer (MLRO) review.
- Ongoing Training – employees must understand what sanctions are, how to identify red flags, when to escalate concerns. Also, it is important to always keep an eye on evolving Sanctions Evasion techniques and jurisdictions. Compliance culture is as important as compliance software.
- Conduct Regular Independent Testing – independent validation helps identify weaknesses. Some regulators require them on a regular basis 9e.g., every 2 years).
Note: This information is provided for general educational and informational purposes only and does not constitute legal advice.
The Future of Sanctions Compliance
Organizations that treat sanctions screening as a proactive risk management tool rather than a regulatory burden are better positioned to operate confidently across borders. Sanctions regimes and requirements are expanding in scope and complexity, but it is also important to consider:
- Greater use of secondary sanctions – some regulators tell foreign companies and individuals (that are not operating in their jurisdiction) that they may face consequences if they deal with sanctioned actors.
- Increasing geopolitical and geoeconomic tensions – new or worsening conflicts can result in new sanctions being issued almost overnight. According to World Economic Forum (WEF), after a year of heightened uncertainty over trade policy, there is now a growing recognition of the escalating use of other economic and political instruments, from sanctions and regulations to capital restrictions and weaponization of supply chains, as tools of geoeconomic strategy.
Picture 6 – According to the 2026 Global Risks Report, geopolitical and geoeconomic tensions now dominate the global risk landscape (Source: World Economic Forum)
- Increased scrutiny of crypto transactions – cryptocurrencies enable fast, cross-border transfers that can occur outside traditional banking systems. While blockchain transactions are traceable, users can obscure ownership through wallets, mixers, layered transactions, or decentralized platforms. Sanctioned individuals or entities may attempt to use crypto to bypass asset freezes or financial restrictions. As a result, regulators are tightening expectations around wallet screening, transaction monitoring, beneficial ownership transparency, and virtual asset service provider (VASP) compliance.
Final Thoughts
Sanctions checks are an essential part of modern financial crime compliance. They protect organizations from legal, financial, and reputational damage while supporting global security objectives.
Building an effective sanctions screening framework requires more than access to lists – it requires precision, scalability, and intelligent calibration that keeps false positives under control without weakening coverage.
AMLYZE Customer Screening is an advanced screening engine designed for accurate, low-noise risk detection across the entire customer lifecycle.
It provides:
- Real-time screening at onboarding and continuous monitoring throughout the customer lifecycle
- Cross-checks against sanctions, PEP lists, watchlists, and adverse media
- Seamless integration with your customer risk assessment process
AMLYZE helps compliance teams stay focused on real risk by delivering:
- <1.00% false positive rate in production environments – significantly reducing alert fatigue
- 40+ tunable parameters to tailor screening precision to your institution’s risk appetite
- 100+ authoritative global sources for sanctions, PEPs, and adverse media
For institutions operating at scale, this level of precision is not just operationally beneficial – it is strategically critical.
How AMLYZE Helps at Scale
When sanctions screening operates at marketplace scale, precision becomes mission-critical.
Vinted Pay – the licensed EMI powering payments for Vinted – selected AMLYZE to unify transaction monitoring, customer risk assessment, and screening in one platform.
What stood out?
“We were really impressed by AMLYZE’s sanction screening mechanism and its lower than 1% false positive rate. That’s extremely important when dealing with a customer base of our size.”
– Simonas Jončiulis, MLRO, Vinted Pay
With over 100 million users across 20+ markets, keeping false positives below 1% is not just operationally helpful – it’s essential for scalability.
👉 Read the full Vinted Pay case study
Want to Validate Your Own Sanctions Screening?
Even mature systems can suffer from rule drift, alert inflation, or hidden detection gaps.
AMLYZE also offers a Sanctions Screening Performance Test – an independent, data-led assessment using 50,000+ controlled, manipulated, and fabricated identities to measure:
- True detection effectiveness
- False positive concentration
- Alert inflation
- Coverage trade-offs
No production data required.
Audit-ready expert report delivered in 2–4 weeks.
👉 Learn more about the Sanctions Screening Performance Test
Mažvydas Miliauskas,
AML Risk & Assessments Lead at TransferGo
👉 See how AMLYZE Screening streamlines your hit-handling and watch-list management. Request a demo today. Get a demo today.
👉 For a broader view of screening, read also our companion articles:
Sanctions Screening: Important as Never Before
Sanctions Screening Process: Best Practices
Importance of Adverse Media Screening
