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Sanctions, embargoes, terrorism, PEP: understanding the typologies of lists

Dernière mise à jour : 6 mars 2023

In this article we will address the following theme: sanctions, embargoes, terrorism, PEP: understanding the typologies of lists and the obligations arising from them.

Above all, it is important to redefine the different characteristics of list screening that aim to eliminate false positives, to refuse new contacts (in case of a true positive or an entity with a doubt that cannot be removed) and to tag politically exposed persons at high AML-CFT risk.

What attitude should we adopt when we identify a "true positive"? (e.g. a terrorist)

First, we will briefly study the different typologies of list.

  • From European lists to THE European list:

We will start with the historical terrorist lists, which marked the beginning of the lists, including the Al-Qaeda list in 2001.

When the list principle was introduced, the principle of a sanction was as follows: freezing of the assets of listed persons and prohibition of making any other type of fund or assets convertible into funds available to these persons. It was mandatory to provide the information to the authorities when in contact with this type of person.

For many years the situation remained as it was. Then, the authorities decided to establish a general terrorist list to complement the historical Al-Qaeda list.

In 2019, the authorities applied a list of cyberterrorists with the same basis of sanctions as the historical list. However, it is still possible to honour contracts prior to the freezing of assets as long as this is not to the benefit of the "positive".

  • Sanctions lists by country:

The sanctions that result from the national lists are country-specific. However, a list of human rights appeared in 2020 with the aim of replacing national lists to unify treatments.

  • FATF lists

There are two lists in this category. They consist of countries where the AML-CFT risk is high. We find the blacklist (high-risk jurisdiction) including the non-cooperative countries, and the grey list illustrating countries under surveillance.

  • The SDN list: Specially Designated Nationals & Blocked Person List

These lists are specific to the United States. They will be useful if you develop a professional

  • OFAC embargoes

Like the previous ones, these lists are only linked to the United States.

From now on, it is interesting to identify what the regulator accepts and what it does not accept in parallel with the change in mentality of the authorities towards the screening of these lists.

Since 1996, regulators have been more cautious, so that if a player is listed, all opportunities or business relationships are terminated. However, in the last two, three years, regulators have become more flexible for economic reasons concerning entities. Today, the ACPR has introduced a text on "non-contagion", that is to say, the freezing of the assets of a subsidiary does not authorize the freezing of the assets of entities of the same group.

Very recently, the EBA (European Banking Authority) has released its guidelines in order to avoid the refusal of massive activity: when you do your due diligence the objective is that they are carried out with measure. Indeed, business relationships should not be spontaneously refused in the event of an AML-CFT risk. Surveillance should be strengthened where the risk is high, which does not exclude the continuation of economic relations.

So what are the dos and don’ts?

In the case of a business relationship with a positive a risk will be manifested in the regulator which will cause an intervention of the competent authorities. You will be exonerated if you were unable to suspect that your actions violated the measures set out in the regulation. However, if you have not acted vigilantly, you may be held liable by the regulator.

It is therefore imperative to treat KYC due diligence with particular care.

In the event that you are unable to remove your doubt, you have therefore had to freeze the assets and funds of the "positive". If the latter, due to the withdrawal from the list, were to contest your initial position, the legislation protects you if the doubt identified was founded. On the other hand, if your initial position was not sufficiently argued (no check on the lists), you could be sanctioned.

How to prepare?

The first step to take is not to carry out 30 detailed procedures per list: the lists are very similar and contact with a real positive remains rare. On the other hand, it is necessary to identify the main scenarios.

The rule to remember is not to screen non-eligible lists: for example, it is useless to screen the SDN list if you have no relationship with the United States.

On the other hand, it is important to be able to target your approach by portfolio, by customer location or by type of product.

Most of the lists recommend a freeze of assets it is therefore necessary to prepare upstream a procedure to quickly meet this obligation.

It is also necessary to prioritize the resolution of sanctions and terrorist correspondence and possibly prioritize according to the life cycle of the product and the capacity to outflow funds.

It is important to know the relevant authorities and have a quick back-to-basics process to adjust the details that will allow you to react quickly.

About Flaminem

Flaminem is a software company, which offers a cloud-base platform to digitize the KYC processes of your customers and / or suppliers.

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Flaminem webinar of 08/04/2021 by Nathalie CHAUVEAU


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