Every screening desk has the same Tuesday afternoon: a queue of alerts, almost all of them somebody abroad who shares a surname with a designated person. The question is not how you clear them, but what you can show months later about how you cleared them.
ICPAC's Sanctions Directive is legally binding and applies to all persons supervised by ICPAC, by virtue of section 59(1)(d) of the AML/CFT Law, L. 188(I)/2007. Issue date 22 June 2021, amended 8 May 2022, 17 July 2024 and 30 June 2026.
Start with what is yours to choose. Firms may choose the type of screening solution, automated or manual, according to the firm's size, nature and risk profile. Firms may consider fuzzy matching, which the Directive defines as identifying not only exact matches but also possible matches where data is misspelled, incomplete or missing, and which also accommodates multinational and linguistic differences in spelling, date formats and other matters. May. The tooling is a judgement call.
What you feed it is not put that way. To minimise mistaken identity, meaning homonyms or near-identical names, firms should use as many identifiers as possible, and for a natural person the screening information should include the name in the original language where available, taking into consideration any transliteration as provided for in official travel documents, plus aliases, gender, date and place of birth, nationality, address and identification or passport number. Designated persons are known to use false personal information or aliases, so firms should consider solutions using several screening protocols, including name reversal.
Limited availability of identifiers cannot justify dealings with a designated person or entity, and lack or limited availability of identifiers suggests improper or inadequate KYC and CDD procedures. A thin file does not make the alert ambiguous; it makes the file the finding.
Annex I is worth pinning up. A hit for any other reason, a PEP or adverse media, is not a sanctions match at all. A natural person in your records against a legal person or a vessel on the list is not a true match. Where only part of the name matches, and the annex's own example is just the last name, you do not have a true match. Several similarities or exact matches, and you do. Missing much of what a list entry carries is not a clearance either: the annex calls the due diligence process lacking.
The documentation rule is where files fail. Positive matches must be properly investigated, and must be immediately reported to the compliance officer, who is responsible for investigating and assessing whether a positive match is a true match. False positives should be properly documented: a written record of all steps and actions taken, with the information, documentation and rationale supporting the conclusion. Firms should be able, when requested, to justify to the supervisory authority the appropriateness, adequacy and breadth of the actions taken to identify a positive match as a false positive, and on screening generally firms must be able to demonstrate to the supervisory authority the frequency of screening, the assessment and the subsequent decision regarding screening matches and reporting.
Where proper investigation using all sources available still cannot determine whether the client is in fact a designated person or entity, the Directive says the firm should seek legal advice. And outsourcing screening does not move the liability: the firm remains fully responsible for discharging all its legal and regulatory obligations and remains liable for any compliance failure, notwithstanding any outsourcing arrangements.
The software produces the alert. You produce the defence.
Not legal advice. Verify against the primary source before acting.
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