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Ultimate Beginner Guide to Sanctions Screening (2025) – Simple Explanation
Sanctions screening is one of the most important controls in AML, KYC, and financial crime compliance. Every bank, fintech, crypto exchange, and financial institution must screen customers to ensure they are not dealing with sanctioned individuals, entities, or countries.
This beginner-friendly 2025 guide explains sanctions, sanctions lists, screening steps, red flags, and how compliance teams manage sanctions risk.
In one line: Sanctions screening checks whether a customer is on a government or international blacklist that restricts financial activity.
What Are Sanctions?
Sanctions are restrictions placed by governments or international bodies to prevent financial crime, terrorism, proliferation, corruption, and threats to global security.
Types of Sanctions
- Financial sanctions – freeze assets, restrict transactions
- Economic sanctions – trade restrictions
- Travel bans
- Arms embargoes
- Sectoral sanctions
- Comprehensive country sanctions
Major Sanctions Lists Used in 2025
- OFAC SDN List (United States)
- EU Sanctions List
- UN Security Council Sanctions List
- UK OFSI Sanctions List
- Canada SEMA / OSFI List
- Australia DFAT Sanctions
- High-risk country advisories (FATF)
Who Should Be Screened?
- Individual customers
- Corporate customers
- Beneficial owners (UBOs)
- PEPs
- Vendors / suppliers
- Employees in sensitive roles
- Crypto wallet addresses (for VASPs)
How Sanctions Screening Works (Simple Step-by-Step)
- Collect full customer details (name, DOB, nationality, aliases)
- Screen against global sanctions lists
- Identify potential matches
- Compare identifiers (DOB, passport, address)
- Determine if it is a true match or false positive
- Escalate true matches to AML/senior management
- Freeze account or restrict activity (if required by law)
- File SAR/STR if suspicious activity is found
What Are False Positives?
A false positive is when the system matches a customer to a sanctions name, but it’s not the same person.
Example: Two individuals have the same name but different birthdates and nationalities.
What Is a True Match?
A true match is when all key identifiers match — name, date of birth, nationality, passport details, etc. True matches require immediate escalation, account freezing (where required), and AML reporting.
Sanctions Red Flags (2025)
- Transactions with high-risk or sanctioned countries
- Customer has multiple identities or name variations
- Use of intermediaries or shell companies
- Large unexplained cross-border transfers
- Crypto transactions linked to sanctioned wallets
- Adverse media linked to terrorism, corruption, or proliferation
Frequently Asked Questions (FAQ)
Is sanctions screening mandatory?
Yes — it is legally required for all regulated financial institutions globally.
Does sanctions screening happen only at onboarding?
No — screening happens during onboarding, ongoing monitoring, and whenever sanctions lists are updated.
What happens if a customer appears on OFAC SDN List?
Activities must stop immediately. Assets may need to be frozen. Senior management and AML teams must be notified.
Want Practical Training in Sanctions Screening?
Learn sanctions screening, OFAC/EU rules, investigations, and high-risk case handling inside GO-AKS KYC Certification and G-CAMO / G-CAMI.
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