November 1, 2024 • 16 mins
In the first of a two-part series we discuss the state of global sanctions as seen in the first half of 2024, with special guests Saskia Rietbroek, Executive Director of the Association of Certified Sanctions Specialists, and Vincent Gaudel, Compliance Expert at LexisNexis Risk Solutions.
Today's episode highlights key changes and trends in terms of sanctions designations and focus areas, and what that means practically for compliance professionals.
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DISCLAIMER: The information provided in this podcast is for informational purposes only and is not intended to and shall not be used as legal advice. The views and opinions expressed in this podcast are solely those of the speakers and do not necessarily reflect the views or positions of LexisNexis Risk Solutions. LexisNexis Risk Solutions does not warrant that the information provided in this podcast is accurate or error-free.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Julia Thorn (00:13):
Welcome to the RegTech Pulse podcast brought to
you by LexisNexis RiskSolutions.
This is the podcast whereindustry experts discuss the
latest trends in financial crimecompliance.
I'm your host, Julia Thorn, andthis is the first in a two-part
series all around sanctions.
In today's episode, we'lldiscuss the state of global
sanctions as seen in the firsthalf of 2024, highlighting key
(00:36):
changes and trends in terms ofsanctions designations and focus
areas and what that meanspractically for compliance
professionals.
In the next episode, we'll bediscussing some of the
enforcement actions from majorregulators and how organizations
can stay on the right side ofthese regulators.
For today's discussion, I'mjoined by Saskia Rietbrook,
executive Director of theAssociation of Certified
(00:57):
Sanction Specialists, andVincent Gaudel, compliance
Expert at LexisNexis RiskSolutions.
Thanks so much for joining us.
Vincent Gaudel (01:04):
Thanks, Julia, pleasure to be here.
Thanks, Saskia.
Saskia Rietbroek (01:07):
Thank you, Vincent, Julia, Nice to be here.
Julia Thorn (01:10):
So I thought, Vincent, maybe we could start
with you If you could give us alittle bit of an overview of
sanctions activity so far in2024.
I know that we released oursanctions pulse ebook recently,
which had some reallyinteresting stats in it, so
maybe you could just dive intosome of those for us.
Vincent Gaudel (01:27):
Sure, yeah.
So we recently released theSanctions Pulse infographic,
which is a regular series thatwe deliver to really keep track
of the sanctions trends from thekey regulatory bodies.
And what's really interestingis to see with numbers that what
started in 2022 as what wasthen described as an exceptional
, unprecedented level ofsanctions development now looks
(01:48):
at the new normal if you look atthe number that we've seen in
the first half of 2024.
So, yeah, we saw really acontinued intense sanctions
activity in the first half of2024.
And really to clarify what wemean by intense sanctions
activity, we really mean thepace, the scale of sanctions
list updates.
So that's prettystraightforward to measure if
(02:10):
you look at targeted sanctions.
But the intensity of sanctionsactivity also translates into
another dimension which is lesseasy to quantify, and that's the
complexity of sanctions.
But for what we can easilymeasure, for the pace and scale
of sanctions imposed by UN, eu,uk and OFAC, let me give you
some numbers for the first halfof 2024.
(02:30):
It's pretty clear and actuallythe numbers are rising from the
same period of 2023.
So, in terms of pace, wemeasure the 146 list updates.
That's a 10% increase comparedto the same period last year.
That's a 10% increase comparedto the same period last year and
as a rough average, itessentially means that there was
one update every business day.
So that's for the pace.
(02:51):
Now on the scale of sanctions,the scale of new designations.
So here we look at the numbersof new targets being added to
those lists.
For the first half of 2024, wehave recorded 2,340 net
designations, again risingcompared to 2023, and the
percentage is 14% increasecompared to the previous year.
(03:14):
So that kind of illustrates theintensity of sanctions activity
and that's obviously a sourceof acute operational challenges
for banks and other businesses.
As in sanctions matter, timelycompliance is really a must.
Julia Thorn (03:31):
And maybe on that point, saskia, you could give a
little bit of background onmaybe some of those specific
challenges that businesses arefacing in terms of.
If these lists are beingupdated once a day, what kind of
a challenge is that causing foryour compliance professionals
in your network?
Saskia Rietbroek (03:47):
Yeah, absolutely.
It's a big challenge forfinancial institutions, but also
other companies, to keep upwith the pace.
The lists are changing.
They're so dynamic, as Vincentexplained, in terms of volume.
There's so much more alerts tolook at because there's so many
more designations.
(04:07):
You know they vary fromjurisdiction to jurisdiction and
if you operate in a globalenvironment you have to really
check.
If you know, you used to getaway with checking mostly the
OFAC list, right, the US list,because they were the most
comprehensive, most numerouslistings.
But now let's say, if you're abank in the United States and
(04:28):
you have maybe subsidiaries inEurope or you're maybe
headquartered in Europe, youalso have to be very careful
with the EU list because youknow some people are designated
by the European Union and not bythe US.
So that divergence of listingsmakes it very complex for people
working in compliance.
Julia Thorn (04:49):
And just on that point around the divergence of
listings, does that typicallymean that one regulator has just
started and then the rest willfollow, or does it mean that
there are just differentapproaches with the different
regulators?
Saskia Rietbroek (05:02):
I think it has something to do with politics.
You know, there's some policyobjectives that they have to be
keeping in mind when designatedin certain politicians or
certain people.
But there's also commercialreasons, right?
Business lobbyists in certaincountries are more strong than
lobbyists in other countries andthey are able to keep some
(05:25):
companies off the list or somepeople, some business owners,
off the list for commercialreasons.
Julia Thorn (05:31):
And I guess, maybe diving into what have been those
focus areas so far.
So, vincent, you mentioned, Ithink, a 14% increase in
designations so far this year.
What's been driving thosenumbers in terms of regions or
maybe sort of thematic focusareas for the different
regulators?
Vincent Gaudel (05:51):
Yeah.
So to be fair and to Saskia'spoint earlier that overall
activity by the four regulatorybodies is primarily the result
of OFAC activity.
Ofac has really been the mostactive agency among the four
that we are monitoring in thereport.
Actually, ofac's designationonly waited for two-thirds of
the overall total.
Ofac remains the overwhelmingagency to consider and the
(06:14):
largest list also to screenagainst.
And what's really interesting isthat those updates for the
first half of 2024, they weremade across the board.
There were close to 20 sanctionsprograms that were touched by
OFAC over the period and that'sreally a broad range of
international issues.
So thematic programs fromterrorism comes frequently on
(06:34):
top in terms of number ofchanges, regular changes to the
lists, but also someinternational issues such as
cybercrime has been prettyactive area and human rights
abuses as well were among thetop thematic programs.
Interestingly and we justtouched upon the kind of the
fragmentation or lack ofalignment between regulators on
cyber measures that's an areawhere we have seen enhanced
(06:57):
cooperation between OFAC and OFCin the UK and they have
actually shared intelligence andcoordinated to issue a joint
designation.
So the same day you had acyber-related designation issued
concurrently by the OFAC andOFC as well.
And just a quick note on theregions or countries that
trigger sanctions responses.
Obviously, we continue to seelots of actions related to
(07:21):
Russian sanctions programs, butwhat's interesting is that the
actual targets designated underRussia programs are no longer
only located in Russia and wesee really the global magnitude
of Russian sanctions, becauseregulators are now looking at
tackling evasion networks andthey are going after and they
are designating targets indifferent regions in the Middle
(07:43):
East, in Central Asia and evenSoutheast Asia.
We really see a globalmagnitude of Russian sanctions
recently.
Saskia Rietbroek (07:51):
Yeah, and if I may add something there as well
, I've been on a couple ofcapacity building missions about
EU sanctions mainly, you know,focus on the Russian sanctions
and the sanctions that we'venever adapted sanctions of this
breadth and depth against anycountry, not even the sanctions
(08:18):
the EU sanctions against Iran inI think it was 2012, which
ultimately brought them to thetable to negotiate the nuclear
deal Nothing like the sanctionsthat we have now against Russia.
And this impacts not only, youknow, european businesses, us
businesses, but also businesseseven in countries that are not
(08:39):
covered by the European or theUS sanctions or the UK sanctions
.
You know countries surroundingRussia Kazakhstan, kyrgyzstan,
armenia and you see businessesthat can get in trouble because
of sanctions that do not applyto them, but just because of
their close proximity to acountry that is sanctioned.
That's Russia in this case.
(09:00):
And I think this cooperationthat Vincent was talking about.
It is really important becauseif you have US sanctions and EU
sanctions and UK sanctions,these sanctions are a lot more
effective when they are adoptedacross countries, instead of
just having one country adoptingthese sanctions.
These sanctions are a lot moreeffective when they are adopted
across countries instead of justhaving one country adopting
these sanctions and the reach isreally really far at this
(09:23):
moment.
Vincent Gaudel (09:24):
And obviously we no longer have lots of
consensual issues being agreedon at the UN level, so the
fragmentation is really a keyissue.
What's really interesting is tosee that some like-minded
countries trying to rebuild somemultilateral networks we have
seen the recent publication byGlobal Export Control Group
(09:45):
right, Some like-mindedcountries really working towards
a common set of items that arerestricted to Russia, but really
the trend of rebuildingmultilateralism, because when
you have unilateral responses itis just a patchwork of measures
that are really complex tocomply with.
Julia Thorn (10:02):
And then what's the practical impact?
So if you're a compliancedepartment, whether you're in a
financial institution or acorporation, what does that mean
?
I guess the frequent changes,the significant increase in
designations, what does it meanfor those compliance
professionals on a day-to-daybasis?
Vincent Gaudel (10:19):
What's really important to emphasize and all
businesses listening to thiswill be aware of this but really
in sanctions matter, timelycompliance is really important.
Like, regulators areincreasingly pushy in terms of
how fast can you implement aparticular list update.
We're talking hours now andsometimes when you're working in
a large financial institutionwith complex systems, complex
(10:44):
customer databases et cetera,that's not an easy process to
push a list update into thosedatabases.
So timely compliance is reallyimportant.
Also, just one thing I wanted toflag, because we talk about new
targets like pretty obvious, anew target means potential new
sanctions risk exposure for abusiness.
But that also and we have seenthose in the first half of 2024,
(11:05):
when you have amendments toexisting records.
That's also pretty challengingbecause first it can mean you
have new identifying informationtriggering potentially new
alerts right.
But even if you don't havetotally new alerts, the very
fact that you change a record ina sanctions list oftentimes
reopens alerts that you hadclosed before already, right.
(11:27):
So when we had a couple ofregulatory updates modifying
large batches of records, thatwas in itself a challenge for
banks to cope with the spike ofhighlights that those amendments
triggered.
Julia Thorn (11:40):
And what about challenges around things like
because you've got parties whichare designated, you've got,
maybe, companies which aredesignated, but then you have
ownership rules, ownershipstructures, ultimate beneficial
ownership, the 50% rule.
Could you dive into those alittle bit more as well in terms
of the impact that they have?
Saskia Rietbroek (11:57):
Yeah, the ownership and control rules are
really complicated.
I mean it's complicated but thecontrol rule gets really
challenging With the ownership.
You have to know who owns 50%of which company, or more than
50% depending on thejurisdiction, the sanctions you
are following.
But I mean that in and ofitself is hard because you don't
(12:22):
only always know who owns thesecompanies and the information
in public records is not alwaysup to date and the information
on control, like who controls acertain company, that's even
harder to know.
You know, maybe their attorneywill know exactly who can
nominate people on the board ofthe company, but that's not
(12:44):
public information and I thinkcompanies and compliance people
are struggling with that kindsof companies in the middle and
boards board members you knowthis person can nominate, you
(13:07):
know has control over thiscompany.
This person has control overthat company.
It gets really complicated tofigure all that out.
Julia Thorn (13:14):
And then I'm sure, if somebody thinks that they're
going to be, if there's a chanceof becoming sanctioned, there's
the potential to transfer right.
You're not going to necessarilystay in control of that, so
that adds another layer ofcomplexity.
Vincent Gaudel (13:25):
Yeah, the complexity is not random.
I think it's on purpose most ofthe time.
Julia Thorn (13:30):
So we've gone down the sort of the challenges and
what that means and how muchthis is having an impact on
compliance professionals.
You both work in this area.
I guess practical advice forcompliance people working in
this, in the environment thatwe're in now, what is some of
the guidance that you would givein terms of practical things
that compliance professionalscan be implementing to stay on
(13:53):
the right side of regulators?
Saskia Rietbroek (14:03):
and one thing the importance of technology
cannot be underscored enough.
Right now it is impossible todo this manually.
You have to have some sort ofautomated tool in place.
So that is one thing, and Ithink also compliance folks have
to push some of theseresponsibilities to the business
lines, to the operations,because they're most of the time
have contacts with the clientsand they are really the eyes
they're most of the time havecontact with the clients and
they are really the eyes and theears of the compliance folks.
Vincent Gaudel (14:26):
Just to react on what Saskia just mentioned the
need for specialist data andspecialist tools to help coping
with those sanctionsrequirements.
Actually, we just talked about50% rule, ownership and control
relationship.
That's a perfect example of whyyou need to source additional
data beyond the officialsanctions list.
Because, okay, for yourcustomers you might be able to
(14:48):
reconcile those complexownership structure etc.
But when you are processingtransactions there is another
party at the other side of thetransaction that you have not
done your KYC on.
You don't know who is owningand or controlling that
counterparty of your customersas well.
So if you don't have that extralayer of sanctions risk
coverage, that extra data thatis not on the list but those
(15:10):
parties are to be consideredsanctioned and actually we saw a
NOFAC enforcement earlier thisyear that for the first time
noted deficiencies related tofailure to detect entities as
sanctioned because of ownershiprelationship by sanctioned
entity then you have someunknown risks.
So you need that extraintelligence, extra data to find
(15:33):
those implicitly sanctionedentities.
Julia Thorn (15:37):
So not an easy challenge, but certainly
something that there aresolutions out there to help.
We're going to wrap up Episode1 here now.
In the next episode, we'regoing to dig into these issues a
little bit more.
We're going to talk about someof the enforcements that we've
been seeing in the first half of2024.
For listeners, we will have alink to the Sanctions Pulse
e-book in the show notes ifyou're interested in taking a
(15:58):
look at that.
We will see you next week withepisode two.
Vincent Saskia.
Thank you so much for joiningand we'll speak to you again
soon.
Vincent Gaudel (16:06):
Thank you both.
Saskia Rietbroek (16:07):
Thank you very much for having me.
Welcome to the RegTech Pulse podcast brought to
you by LexisNexis RiskSolutions.
This is the podcast whereindustry experts discuss the
latest trends in financial crimecompliance.
I'm your host, Julia Thorn, andthis is the first in a two-part
series all around sanctions.
In today's episode, we'lldiscuss the state of global
sanctions as seen in the firsthalf of 2024, highlighting key
(00:36):
changes and trends in terms ofsanctions designations and focus
areas and what that meanspractically for compliance
professionals.
In the next episode, we'll bediscussing some of the
enforcement actions from majorregulators and how organizations
can stay on the right side ofthese regulators.
For today's discussion, I'mjoined by Saskia Rietbrook,
executive Director of theAssociation of Certified
(00:57):
Sanction Specialists, andVincent Gaudel, compliance
Expert at LexisNexis RiskSolutions.
Thanks so much for joining us.
Vincent Gaudel (01:04):
Thanks, Julia, pleasure to be here.
Thanks, Saskia.
Saskia Rietbroek (01:07):
Thank you, Vincent, Julia, Nice to be here.
Julia Thorn (01:10):
So I thought, Vincent, maybe we could start
with you If you could give us alittle bit of an overview of
sanctions activity so far in2024.
I know that we released oursanctions pulse ebook recently,
which had some reallyinteresting stats in it, so
maybe you could just dive intosome of those for us.
Vincent Gaudel (01:27):
Sure, yeah.
So we recently released theSanctions Pulse infographic,
which is a regular series thatwe deliver to really keep track
of the sanctions trends from thekey regulatory bodies.
And what's really interestingis to see with numbers that what
started in 2022 as what wasthen described as an exceptional
, unprecedented level ofsanctions development now looks
(01:48):
at the new normal if you look atthe number that we've seen in
the first half of 2024.
So, yeah, we saw really acontinued intense sanctions
activity in the first half of2024.
And really to clarify what wemean by intense sanctions
activity, we really mean thepace, the scale of sanctions
list updates.
So that's prettystraightforward to measure if
(02:10):
you look at targeted sanctions.
But the intensity of sanctionsactivity also translates into
another dimension which is lesseasy to quantify, and that's the
complexity of sanctions.
But for what we can easilymeasure, for the pace and scale
of sanctions imposed by UN, eu,uk and OFAC, let me give you
some numbers for the first halfof 2024.
(02:30):
It's pretty clear and actuallythe numbers are rising from the
same period of 2023.
So, in terms of pace, wemeasure the 146 list updates.
That's a 10% increase comparedto the same period last year.
That's a 10% increase comparedto the same period last year and
as a rough average, itessentially means that there was
one update every business day.
So that's for the pace.
(02:51):
Now on the scale of sanctions,the scale of new designations.
So here we look at the numbersof new targets being added to
those lists.
For the first half of 2024, wehave recorded 2,340 net
designations, again risingcompared to 2023, and the
percentage is 14% increasecompared to the previous year.
(03:14):
So that kind of illustrates theintensity of sanctions activity
and that's obviously a sourceof acute operational challenges
for banks and other businesses.
As in sanctions matter, timelycompliance is really a must.
Julia Thorn (03:31):
And maybe on that point, saskia, you could give a
little bit of background onmaybe some of those specific
challenges that businesses arefacing in terms of.
If these lists are beingupdated once a day, what kind of
a challenge is that causing foryour compliance professionals
in your network?
Saskia Rietbroek (03:47):
Yeah, absolutely.
It's a big challenge forfinancial institutions, but also
other companies, to keep upwith the pace.
The lists are changing.
They're so dynamic, as Vincentexplained, in terms of volume.
There's so much more alerts tolook at because there's so many
more designations.
(04:07):
You know they vary fromjurisdiction to jurisdiction and
if you operate in a globalenvironment you have to really
check.
If you know, you used to getaway with checking mostly the
OFAC list, right, the US list,because they were the most
comprehensive, most numerouslistings.
But now let's say, if you're abank in the United States and
(04:28):
you have maybe subsidiaries inEurope or you're maybe
headquartered in Europe, youalso have to be very careful
with the EU list because youknow some people are designated
by the European Union and not bythe US.
So that divergence of listingsmakes it very complex for people
working in compliance.
Julia Thorn (04:49):
And just on that point around the divergence of
listings, does that typicallymean that one regulator has just
started and then the rest willfollow, or does it mean that
there are just differentapproaches with the different
regulators?
Saskia Rietbroek (05:02):
I think it has something to do with politics.
You know, there's some policyobjectives that they have to be
keeping in mind when designatedin certain politicians or
certain people.
But there's also commercialreasons, right?
Business lobbyists in certaincountries are more strong than
lobbyists in other countries andthey are able to keep some
(05:25):
companies off the list or somepeople, some business owners,
off the list for commercialreasons.
Julia Thorn (05:31):
And I guess, maybe diving into what have been those
focus areas so far.
So, vincent, you mentioned, Ithink, a 14% increase in
designations so far this year.
What's been driving thosenumbers in terms of regions or
maybe sort of thematic focusareas for the different
regulators?
Vincent Gaudel (05:51):
Yeah.
So to be fair and to Saskia'spoint earlier that overall
activity by the four regulatorybodies is primarily the result
of OFAC activity.
Ofac has really been the mostactive agency among the four
that we are monitoring in thereport.
Actually, ofac's designationonly waited for two-thirds of
the overall total.
Ofac remains the overwhelmingagency to consider and the
(06:14):
largest list also to screenagainst.
And what's really interesting isthat those updates for the
first half of 2024, they weremade across the board.
There were close to 20 sanctionsprograms that were touched by
OFAC over the period and that'sreally a broad range of
international issues.
So thematic programs fromterrorism comes frequently on
(06:34):
top in terms of number ofchanges, regular changes to the
lists, but also someinternational issues such as
cybercrime has been prettyactive area and human rights
abuses as well were among thetop thematic programs.
Interestingly and we justtouched upon the kind of the
fragmentation or lack ofalignment between regulators on
cyber measures that's an areawhere we have seen enhanced
(06:57):
cooperation between OFAC and OFCin the UK and they have
actually shared intelligence andcoordinated to issue a joint
designation.
So the same day you had acyber-related designation issued
concurrently by the OFAC andOFC as well.
And just a quick note on theregions or countries that
trigger sanctions responses.
Obviously, we continue to seelots of actions related to
(07:21):
Russian sanctions programs, butwhat's interesting is that the
actual targets designated underRussia programs are no longer
only located in Russia and wesee really the global magnitude
of Russian sanctions, becauseregulators are now looking at
tackling evasion networks andthey are going after and they
are designating targets indifferent regions in the Middle
(07:43):
East, in Central Asia and evenSoutheast Asia.
We really see a globalmagnitude of Russian sanctions
recently.
Saskia Rietbroek (07:51):
Yeah, and if I may add something there as well
, I've been on a couple ofcapacity building missions about
EU sanctions mainly, you know,focus on the Russian sanctions
and the sanctions that we'venever adapted sanctions of this
breadth and depth against anycountry, not even the sanctions
(08:18):
the EU sanctions against Iran inI think it was 2012, which
ultimately brought them to thetable to negotiate the nuclear
deal Nothing like the sanctionsthat we have now against Russia.
And this impacts not only, youknow, european businesses, us
businesses, but also businesseseven in countries that are not
(08:39):
covered by the European or theUS sanctions or the UK sanctions
.
You know countries surroundingRussia Kazakhstan, kyrgyzstan,
armenia and you see businessesthat can get in trouble because
of sanctions that do not applyto them, but just because of
their close proximity to acountry that is sanctioned.
That's Russia in this case.
(09:00):
And I think this cooperationthat Vincent was talking about.
It is really important becauseif you have US sanctions and EU
sanctions and UK sanctions,these sanctions are a lot more
effective when they are adoptedacross countries, instead of
just having one country adoptingthese sanctions.
These sanctions are a lot moreeffective when they are adopted
across countries instead of justhaving one country adopting
these sanctions and the reach isreally really far at this
(09:23):
moment.
Vincent Gaudel (09:24):
And obviously we no longer have lots of
consensual issues being agreedon at the UN level, so the
fragmentation is really a keyissue.
What's really interesting is tosee that some like-minded
countries trying to rebuild somemultilateral networks we have
seen the recent publication byGlobal Export Control Group
(09:45):
right, Some like-mindedcountries really working towards
a common set of items that arerestricted to Russia, but really
the trend of rebuildingmultilateralism, because when
you have unilateral responses itis just a patchwork of measures
that are really complex tocomply with.
Julia Thorn (10:02):
And then what's the practical impact?
So if you're a compliancedepartment, whether you're in a
financial institution or acorporation, what does that mean
?
I guess the frequent changes,the significant increase in
designations, what does it meanfor those compliance
professionals on a day-to-daybasis?
Vincent Gaudel (10:19):
What's really important to emphasize and all
businesses listening to thiswill be aware of this but really
in sanctions matter, timelycompliance is really important.
Like, regulators areincreasingly pushy in terms of
how fast can you implement aparticular list update.
We're talking hours now andsometimes when you're working in
a large financial institutionwith complex systems, complex
(10:44):
customer databases et cetera,that's not an easy process to
push a list update into thosedatabases.
So timely compliance is reallyimportant.
Also, just one thing I wanted toflag, because we talk about new
targets like pretty obvious, anew target means potential new
sanctions risk exposure for abusiness.
But that also and we have seenthose in the first half of 2024,
(11:05):
when you have amendments toexisting records.
That's also pretty challengingbecause first it can mean you
have new identifying informationtriggering potentially new
alerts right.
But even if you don't havetotally new alerts, the very
fact that you change a record ina sanctions list oftentimes
reopens alerts that you hadclosed before already, right.
(11:27):
So when we had a couple ofregulatory updates modifying
large batches of records, thatwas in itself a challenge for
banks to cope with the spike ofhighlights that those amendments
triggered.
Julia Thorn (11:40):
And what about challenges around things like
because you've got parties whichare designated, you've got,
maybe, companies which aredesignated, but then you have
ownership rules, ownershipstructures, ultimate beneficial
ownership, the 50% rule.
Could you dive into those alittle bit more as well in terms
of the impact that they have?
Saskia Rietbroek (11:57):
Yeah, the ownership and control rules are
really complicated.
I mean it's complicated but thecontrol rule gets really
challenging With the ownership.
You have to know who owns 50%of which company, or more than
50% depending on thejurisdiction, the sanctions you
are following.
But I mean that in and ofitself is hard because you don't
(12:22):
only always know who owns thesecompanies and the information
in public records is not alwaysup to date and the information
on control, like who controls acertain company, that's even
harder to know.
You know, maybe their attorneywill know exactly who can
nominate people on the board ofthe company, but that's not
(12:44):
public information and I thinkcompanies and compliance people
are struggling with that kindsof companies in the middle and
boards board members you knowthis person can nominate, you
(13:07):
know has control over thiscompany.
This person has control overthat company.
It gets really complicated tofigure all that out.
Julia Thorn (13:14):
And then I'm sure, if somebody thinks that they're
going to be, if there's a chanceof becoming sanctioned, there's
the potential to transfer right.
You're not going to necessarilystay in control of that, so
that adds another layer ofcomplexity.
Vincent Gaudel (13:25):
Yeah, the complexity is not random.
I think it's on purpose most ofthe time.
Julia Thorn (13:30):
So we've gone down the sort of the challenges and
what that means and how muchthis is having an impact on
compliance professionals.
You both work in this area.
I guess practical advice forcompliance people working in
this, in the environment thatwe're in now, what is some of
the guidance that you would givein terms of practical things
that compliance professionalscan be implementing to stay on
(13:53):
the right side of regulators?
Saskia Rietbroek (14:03):
and one thing the importance of technology
cannot be underscored enough.
Right now it is impossible todo this manually.
You have to have some sort ofautomated tool in place.
So that is one thing, and Ithink also compliance folks have
to push some of theseresponsibilities to the business
lines, to the operations,because they're most of the time
have contacts with the clientsand they are really the eyes
they're most of the time havecontact with the clients and
they are really the eyes and theears of the compliance folks.
Vincent Gaudel (14:26):
Just to react on what Saskia just mentioned the
need for specialist data andspecialist tools to help coping
with those sanctionsrequirements.
Actually, we just talked about50% rule, ownership and control
relationship.
That's a perfect example of whyyou need to source additional
data beyond the officialsanctions list.
Because, okay, for yourcustomers you might be able to
(14:48):
reconcile those complexownership structure etc.
But when you are processingtransactions there is another
party at the other side of thetransaction that you have not
done your KYC on.
You don't know who is owningand or controlling that
counterparty of your customersas well.
So if you don't have that extralayer of sanctions risk
coverage, that extra data thatis not on the list but those
(15:10):
parties are to be consideredsanctioned and actually we saw a
NOFAC enforcement earlier thisyear that for the first time
noted deficiencies related tofailure to detect entities as
sanctioned because of ownershiprelationship by sanctioned
entity then you have someunknown risks.
So you need that extraintelligence, extra data to find
(15:33):
those implicitly sanctionedentities.
Julia Thorn (15:37):
So not an easy challenge, but certainly
something that there aresolutions out there to help.
We're going to wrap up Episode1 here now.
In the next episode, we'regoing to dig into these issues a
little bit more.
We're going to talk about someof the enforcements that we've
been seeing in the first half of2024.
For listeners, we will have alink to the Sanctions Pulse
e-book in the show notes ifyou're interested in taking a
(15:58):
look at that.
We will see you next week withepisode two.
Vincent Saskia.
Thank you so much for joiningand we'll speak to you again
soon.
Vincent Gaudel (16:06):
Thank you both.
Saskia Rietbroek (16:07):
Thank you very much for having me.
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