What should a financial institution do if it identifies a customer on a sanctions list?

Continuing to process transactions poses a significant legal risk, as it may inadvertently facilitate transactions with sanctioned individuals or entities. Flagging transactions may not be sufficient to protect the institution from penalties, as immediate action is necessary when a customer is identified on a sanctions list.

While closing the account may seem like a solution, doing so without notifying the customer can lead to complications, including potential legal challenges. Financial institutions are typically required to inform customers of account actions unless doing so would violate sanctions regulations.

Requesting additional documentation does not address the immediate risk posed by the customer being on a sanctions list. It is essential to act promptly by freezing the account rather than delaying the process while seeking further information, as this could result in regulatory non-compliance.