Don’t be Knocked out by Sanctions Evasion — 5 Steps to Bolster Your AML Framework

Whilst firms are struggling to keep up to date with ever-increasing Russia sanctions, bad actors are always finding new ways to evade restrictions.

In this punch/counterpunch scenario, financial institutions should shift from an “if to when” mentality regarding sanctions evasion and build a proactive and evolving detection and prevention strategy. If your institution hasn’t done a recent anti-money laundering (AML) framework assessment, now may be the time.

For any institution evaluating their AML framework, our vast financial crime experience has shown they should be asking these five questions to quickly bolster against any sanction’s vulnerabilities:

1. Have you re-assessed your AML risk focusing on country risk rankings? This can help you quickly identify friendly or less transparent jurisdictions that can be used to bypass sanctions controls.
2. Is your risk appetite statement up to date given the current situation—and is your firm still operating within its risk appetite? Have you taken appropriate action if not?
3. Are you placing enhanced scrutiny on correspondent banking/agent relationships, particularly those with end customers in Russia-friendly jurisdictions?
4. Are your due-diligence processes robust? Are you seeing an appropriate increase in trigger-based reviews? How do you know if the Ultimate Beneficial Ownership or the ownership structure for your corporate/trust clients have changed recently? Is the information you hold on source of wealth credible? Have you identified Relatives and Close Associates appropriately?
5. Is your transaction monitoring system identifying changes in account behaviours appropriately? Do your rules appropriately cover today’s risks?

While it’s impossible to make your organisation impervious to any sanctions challenges, by focusing efforts on the above, financial institutions can better protect themselves about known and unforeseen sanctions challenges.

We encourage you to read about the implications of the Russia-Ukraine conflict on firms’ broader anti-financial crime frameworks in our paper Beyond Sanctions.