HomeEducationHow Criminal and PEPs Exploit Sanction Screening System?

How Criminal and PEPs Exploit Sanction Screening System?

Sanction list screening is a process of identifying suspicious activities, detecting illegal transactions, and taking measures to prevent Money laundering and terror financing. Businesses are obliged to conduct sanction screening to comply with AML compliance.  Despite the strict compliance and an essential screening process for all enterprises, criminals still exploit the finite sanctions screening.  

Just like regulatory bodies and AML compliance that regularly update their policies to make the process more strict for criminals, the criminals also keep searching for loopholes in the system to avoid these sanctions. They can hide their real identity, use other people’s names and companies, and so on.

In this blog, we will discuss the different methods a criminal may use to bypass or exploit the screening process to get involved in money laundering. This writing will also highlight the importance of choosing the right screening tool that does not let criminal minds bypass it. 

Methods and Techniques Employed by Criminals to Circumvent the Sanction Screening Process

People with criminal records always strive to find ways to help them dodge the sanction screening system. Here are some of the ways that criminals may use to avoid themselves from being detected during the screening process.

1. Structuring Transactions

The banks and financial institutions detect suspicious transactions if they exceed the reporting threshold. Criminals see this as an opportunity, splitting large transactions into smaller ones that don’t trigger reporting requirements. By doing so, they stay under the radar of screening systems, looking for larger, more conspicuous amounts.

2. Using Front Companies and Associates

Politically Exposed Persons often do business on behalf of their relatives or aliases. So, Criminals may conduct their business through other companies or people that seem unrelated to them. These relatively unknown entities engage in transactions on behalf of the criminal, which makes it hard for sanction list screening systems to trace the activity back to someone on a sanctions list. The amount earned through corruption, bribery, or by thevetin is often money laundered this way.  

3. Complex Ownership Structures

Due to the less strict customer due diligence process, criminals launder their illegally obtained money in countries with less strict regulations. By setting up a web of companies with confusing ownership ties, they find countries with less AML compliance that help them hide who owns the money. This complexity can overwhelm screening systems, which may need help to untangle the proper ownership.

4. False Documentation and Identity Theft

The sanctioning list only detects those who have criminal records or are prone to money laundering and terror financing. This helps financial criminals Use fake documents or steal someone’s identity to open accounts or make transactions to bypass screening systems. Because the sanction will not detect such suspicious transactions. If the name used isn’t on a watchlist, the system might not flag it as suspicious.

5. Rapid Movement of Funds

Only some Screening systems are updated as regulatory bodies continuously add and remove people from the watchlist. If the system needs to be updated, moving money quickly between accounts or countries can outpace the ability to screen systems to track it.

6. Exploiting Loopholes in Legal Frameworks

 Today, many countries and organizations keep the sanction screening process as a waste of time and resources, and they enforce either no law or weaker laws to detect any suspicious activities that lead to money laundering. Criminals find such destinations as heaven to launder their money. They find and use these loopholes to avoid the sanction screening process.

Best Practices for Sanction Screening Compliance

Organizations need to stay updated to avoid any disruption in the business process. In business, they may think they are implementing best practices, but they have to face penalties and sanctions due to non-compliance. Here are some ways to gain the upper hand on criminals in the screening process by opting for them. 

  • The first and foremost way to avoid money laundering is to ensure that your data collection process is up-to-date. The use of advanced AI-integrated software can improve the data collection process.  
  • Your business also needs to invest in the technology. Sanction screening system using reliable and proven technology can make ways for you to detect even when your screening system has some loopholes.
  • You can only risk your business reputation by relying on reliable and outdated ways of screening. You need a single screening tool to screen against the maximum sanctions list.

A reliable Screening Tool is the Way Forward.

Loopholes in the sanction screening checks encourage criminals to do money laundering without fear of detection. In such circumstances, your business needs reliable AML screening software to screen against all available watchlists across the globe. 



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