What Is Sanctions Screening? A 2025 Compliance Toolkit

Sanctions screening is critical for compliance in financial and regulated sectors. It helps stop money laundering and terrorism financing while protecting global financial security. In 2025, more than 57,000 active records exist across 300+ programs. This complexity, with multiple jurisdictions, languages, and frequent updates, forces compliance teams to manage false positives and large amounts of international data effectively.

Even with these challenges, the need for robust sanctions screening systems has never been more pronounced. Substantial fines have been levied against major financial institutions in recent years for lapses in their compliance measures, underscoring the importance of effective screening.

What Are Sanctions?

Sanctions are among the most powerful tools governments and international bodies use to influence global affairs. They can block trade, freeze assets or cut entire regimes off from the financial system, aiming to curb human rights abuses, terrorism financing or weapons proliferation.

For businesses, sanctions aren’t just foreign policy measures. They represent serious compliance obligations, where a single oversight can trigger heavy fines and reputational damage.

Key Sanctioning Bodies

Sanctions programs are maintained by different authorities, and their rules often overlap. This makes it essential for organizations working across borders to monitor several regulators at once:

United Nations (UN): Issues sanctions through the Security Council, binding on all member states.
Office of Foreign Assets Control (OFAC, U.S.): Enforces U.S. sanctions that affect companies worldwide.
European Union (EU): Coordinates sanctions across its 27 members, often targeting corruption, rights abuses or destabilizing regimes.
UK Office of Financial Sanctions Implementation (OFSI): Enforces the UK’s financial sanctions and provides compliance guidance.

What Is a Sanctions List?

Every program is built on a sanctions list — an evolving record of restricted people, companies, vessels or states. These lists are updated frequently in response to political crises and regulatory changes, making real-time monitoring essential.

Types of Sanctions

Sanctions vary in scope and intent. Some are explicit, naming individuals or entities directly; others are narrative, banning entire categories of behavior like weapons trading. Comprehensive sanctions can block all trade with a country, while targeted measures freeze the assets of specific figures such as corrupt officials. Finally, sectoral sanctions restrict industries like energy, finance or defense, limiting access to global markets.

What Is Sanctions Screening?

Sanctions screening is a key process within Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) efforts. It involves checking individuals and entities against global sanctions lists to ensure compliance with regulatory requirements. As a core component of Know-Your-Customer (KYC) protocols, it plays a vital role in due diligence and risk management to prevent financial crimes.

With sanctions regulations constantly evolving, businesses must stay current to meet legal obligations. Sanctions screening helps enforce compliance, reduce risk exposure, and support international security and financial transparency.

How Does the Sanctions Screening Process Work?

Sanctions screening is the process of checking customer information against government and international sanctions lists to ensure individuals or entities are not prohibited from engaging in financial activity.

An effective sanctions screening program includes several key steps:

Customer identity verification: At the start of any relationship, verifying customer identities is essential. This forms the foundation of Know Your Customer (KYC) procedures and ensures accurate data is used for sanctions screening and compliance checks.
List screening: Customer data should be screened against multiple sources, including government and international sanctions lists, politically exposed persons (PEP) databases, adverse media, and jurisdiction-specific watchlists to capture a full risk profile.
Manual match verification: Not every flagged name is a true match. Carefully reviewing potential matches helps reduce false positives, particularly those caused by common names or similar data points, preventing unnecessary disruptions.
Transaction blocking and reporting: When a confirmed match appears, the business must stop the transaction immediately. The compliance officer then escalates the case and reports it to the proper regulatory authority.
Risk labeling and ongoing monitoring: Individuals or entities flagged as high-risk should be continuously monitored. Assigning risk levels allows businesses to apply enhanced due diligence where needed and adapt to changes in behavior or status.
Internal auditing and compliance oversight: Regular internal audits ensure that the sanctions screening process is functioning as intended. These reviews help verify that protocols are properly documented and executed to meet regulatory standards.

By following these steps, businesses align with global compliance standards and reduce the risk of financial crime.

The Importance of Sanctions Screening in AML Compliance

For regulated industries such as financial services and real estate, effective sanctions screening is essential to both prevent terrorism and international money laundering and reduce the risk of costly noncompliance penalties. Avoiding links to criminal or terrorist financing is critical. Even a single lapse can cause lasting reputational damage. For example, if a traditional bank processes transactions tied to hostile entities, its public image may suffer irreversible harm.

In 2025, OFAC has intensified enforcement, including a $216 million penalty against GVA Capital for Russia/Ukraine sanctions breaches. These cases prove that a strong Financial Crime Compliance (FCC) or Sanctions Compliance Program (SCP) is more than a legal formality—it is essential to protect trust, avoid penalties, and keep operations running smoothly.

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What Businesses Require Sanctions Screening?

Sanctions screenings are mandated whenever a business engages in international transactions or operates within sectors particularly vulnerable to money laundering, terrorism financing or other illicit financial activities.

Below are specific scenarios and industries where sanctions screening is typically required:

Financial Services: Banks and Financial Institutions are required to perform sanctions screening on all customers to prevent money laundering and terrorism financing. This includes routine checks on account openings, money transfers and cross-border transactions.
Investment firms must screen transactions and their clients to ensure compliance with international financial regulations and to prevent the funding of illegal activities.
International Trade: Export/Import companies are required to screen transactions and business partners to ensure that they are not dealing with entities or individuals on any sanctions lists, crucial for complying with trade regulations and avoiding severe penalties.
Legal and Professional Services: Law Firms and Consultancies need to conduct due diligence on their clients to ensure they are not indirectly supporting illegal activities through their advisory services.
Real Estate: Real Estate Agencies and Developers conduct transactions involving high-value assets, which are often targeted for money laundering. Screening potential buyers and investors helps prevent the illegal inflow of funds into the real estate market.
Technology and Telecom: Tech Companies and ISPs, especially those that provide services that can be used globally, conduct screening to ensure that their services are not used by sanctioned entities or for cybercrime activities.
Non-Profit Sector: NGOs and Charitable Organizations must screen donations and transactions to ensure that funds are not diverted to support terrorism or other sanctioned activities.
Energy and Commodities: Oil, gas, and mining companies are subject to geopolitical sensitivities and must screen transactions and business relationships to ensure compliance with international sanctions and avoid funding conflicts.

PEP Screening

Politically Exposed Person (PEP) screening focuses on identifying individuals who hold or have held significant public roles and their close associates and family members. These individuals may pose higher risks due to their positions, making them potential targets for corruption and financial manipulation. Financial institutions and other obligated entities implement PEP screening to ensure compliance with global regulatory standards, including thorough checks to uncover any financial risks or unethical activities associated with high-ranking public figures and adverse media coverage.

PEP lists form a key part of a strong sanctions strategy. Companies must tailor these lists to their own risk appetite. Because relatives and close associates (RCAs) also face scrutiny, compliance teams need Enhanced Due Diligence (EDD). This process investigates their source of funds and assesses risk more thoroughly than for standard customers.

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Best Practices

How to Perform Effective Sanctions Screening

To minimize risks associated with crime, fraud, and non-compliance with Anti-Money Laundering (AML) regulations, establishing a multi-layered sanctions screening process is essential. This involves integrating various elements and expertise across your organization. Here are 4 the essential steps of effective sanctions screening in AML:

1. AML Roles and Responsibilities

An effective sanctions screening program starts with the AML Compliance Officer, a legally required role. This person oversees the screening process, trains staff, and updates strategies to meet new threats and regulations.

Compliance teams must also understand international AML laws, especially sanctions from the US, EU, and UK, and adjust their processes accordingly. Finally, it’s important to define and regularly review your organization’s risk appetite to guide screening efforts and stay within acceptable risk limits.

2. Technology and Software Capabilities

AML software plays a critical role within the broader risk management ecosystem. It should perform core functions like list checking, transaction monitoring, risk assessments, and audit reporting. Advanced capabilities such as fuzzy matching help detect name variations and aliases, improving screening accuracy. The software must also support real-time updates to sanctions lists and integrate them seamlessly to ensure ongoing compliance with changing regulations.

3. Data and Risk Management

Reliable sanctions screening depends heavily on high-quality data. Organizations must maintain accurate and complete customer profiles, supported by routine data audits and advanced data management technologies. These efforts reduce the likelihood of risk assessment errors and strengthen the foundation for compliance decisions. Risk management proficiency is also key—teams should be skilled in using compliance software and adjusting rules dynamically to reflect shifts in the risk environment.

4. Training, Monitoring, and Reporting

A strong training program ensures staff stay informed and capable. This includes structured learning, practical case studies, regular refreshers, and updates reflecting current compliance practices and tools. In parallel, manual review processes should be clearly defined, especially for handling potential matches against sanctions lists. These protocols must outline documentation steps, escalation procedures, and decision-making criteria to confirm or dismiss flagged results with confidence and consistency.

By following these guidelines, organizations design and execute an AML sanctions screening process that reduces the risk of non-compliance. This approach also strengthens operational compliance.

How SEON Facilitates the Sanctions Screening Process

SEON empowers compliance teams to move beyond static list checks by embedding sanctions screening into a unified fraud prevention and AML solution. Instead of treating screening as a siloed task, SEON integrates it seamlessly into KYC, enhanced due diligence (EDD) and ongoing transaction monitoring, ensuring risks are spotted at every stage of the customer lifecycle.

By combining real-time sanctions and watchlist data with digital footprint analysis, device intelligence and behavioral analysis, SEON helps organizations build a richer customer profile. This reduces false positives and highlights genuine threats faster, enabling teams to act on meaningful risks rather than getting buried in noise. The system’s adaptive machine learning continuously evolves with new laundering tactics, learning from analyst feedback and improving match accuracy over time.

With SEON, compliance isn’t just about avoiding penalties — it’s about creating a resilient, adaptive command center for fraud prevention and AML compliance. The result is lower operational risk, stronger customer trust and the agility to stay ahead of evolving financial crime.

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Sanctions rules change daily, and falling behind is costly. SEON unites real-time sanctions screening, fraud prevention, and AML compliance in one powerful platform.

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Frequently Asked Questions

What are sanctions in AML?

Within anti-money laundering mandates, sanctions are restrictions imposed upon entities that are meant to prohibit that entity from furthering their agenda through business. These entities generally have been determined to be malicious or otherwise detrimental – for instance, members of terrorist groups and warmongers.

Who should be screened for sanctions?

For companies that fall within the AML perimeter, all new users should be screened against all relevant sanctions lists during the onboarding process. Existing users determined to be risky should also have their transactions monitored for involvement with sanctioned entities, as well as for suspicious behavior associated with corruption.

Who needs to do sanctions screening?

Depending on the jurisdiction – including any country business is being conducted – certain verticals need to do sanctions screening as part of KYC. Regulated verticals typically include financial institutions, building societies and other money services, gambling institutions, and in some cases high-end retail like art dealers and real estate services.

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