A financial institution is developing a sanctions compliance program. What is a critical component?

Restricting sanctions screening to high-value transactions poses a significant risk, as lower-value transactions can also involve sanctioned parties. Such a limitation could allow numerous compliance breaches to occur undetected, thereby exposing the institution to financial penalties and reputational damage.

While outsourcing can be part of a compliance strategy, relying solely on a third-party vendor for sanctions screening may lead to lapses in oversight and accountability. Financial institutions must retain ultimate responsibility for compliance and cannot offload this critical function entirely to external entities without sufficient internal controls.

Screening only at account opening fails to account for ongoing transactions that may involve sanctioned entities or individuals. Sanctions lists are continually updated, and without real-time monitoring, institutions risk facilitating illegal transactions long after the initial account verification.