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How AI Can Help FIs Combat Sanctions Evasion
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We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website. </span>.</p> </div> </div> </div> <article id="mvp-article-wrap" itemscope itemtype="http://schema.org/NewsArticle"> <meta itemscope itemprop="mainEntityOfPage" itemType="https://schema.org/WebPage" itemid="https://www.globalbankingandfinance.com/the-threat-of-sanctions-evasion-creates-challenges-similar-to-those-in-aml-but-ai-can-help/"/> <div id="mvp-article-cont" class="left relative"> <div class="mvp-main-box"> <div id="mvp-post-main" class="left relative"> <header id="mvp-post-head" class="left relative"> <h3 class="mvp-post-cat left relative"><a class="mvp-post-cat-link" href="https://www.globalbankingandfinance.com/business/" data-wpel-link="internal" rel="follow"><span class="mvp-post-cat left">Business</span></a></h3> <h1 class="mvp-post-title left entry-title deepika" itemprop="headline">The threat of sanctions evasion creates challenges similar to those in AML. But AI can help.</h1> </header> <div class="mvp-post-main-out left relative"> <div class="mvp-post-main-in"> <div id="mvp-post-content" class="left relative"> <div id="mvp-post-feat-img" class="left relative mvp-post-feat-img-wide2" itemprop="image" itemscope itemtype="https://schema.org/ImageObject"> <img width="724" height="483" src="https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/iStock-1956490625.webp" class="attachment- size- wp-post-image" alt="" decoding="async" fetchpriority="high" srcset="https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/iStock-1956490625.webp 724w, https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/iStock-1956490625-531x354.webp 531w" sizes="(max-width: 724px) 100vw, 724px" /> <meta itemprop="url" content="https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/iStock-1956490625.webp"> <meta itemprop="width" content="724"> <meta itemprop="height" content="483"> </div><!--mvp-post-feat-img--> <div id="mvp-content-wrap" class="left relative"> <div class="mvp-post-soc-out right relative"> <div class="mvp-post-soc-in"> <div id="mvp-content-body" class="left relative"> <div id="mvp-content-body-top" class="left relative"> <div id="mvp-content-main" class="left relative"> <p>Published : <span class="mvp-post-date">6 months ago</span>, on <span class="mvp-post-date updated"><time class="post-date updated" itemprop="datePublished" datetime="2024-06-10">10/06/2024</time></span></p> <meta itemprop="dateModified" content="2024-10-19 6:14 am"/> <h1>The threat of sanctions evasion creates challenges similar to those in AML. But AI can help.</h1> <p><i>By Elizabeth Callan is the AML & Sanctions Compliance and Risk Management SME at <a href="https://t.yesware.com/tt/6b514b0ef75d2f929756c90abeba805670a83c5a/660a9e3ae3017c9935448f67b9f27691/b2d016e6d2cbb27b34b9aed488591347/www.symphonyai.com/financial-services/" target="_blank" rel="noopener nofollow" data-saferedirecturl="https://www.google.com/url?q=https://t.yesware.com/tt/6b514b0ef75d2f929756c90abeba805670a83c5a/660a9e3ae3017c9935448f67b9f27691/b2d016e6d2cbb27b34b9aed488591347/www.symphonyai.com/financial-services/&source=gmail&ust=1718293118165000&usg=AOvVaw1b02u9lMrExF5BUDx7v0uZ" data-wpel-link="external">SymphonyAI Financial Services</a></i></p> <p>The landscape of international sanctions is evolving. Lists are growing along with the introduction of unprecedented efforts, such as the oil price cap.</p> <p>Financial institutions (FIs) and firms face mounting compliance challenges. Comprehensive sanctions compliance, particularly with sectoral sanctions and the 50 percent rule, can be a complicated task and must extend beyond list-based screening to include the detection of sophisticated evasion techniques that mask connections several degrees removed from the named targets.</p> <p><b>Sneaky trade, illegal transactions</b></p> <p>Sanctions have significant economic impacts, evidenced by Russia’s adaptation to Western sanctions through <a href="https://www.reuters.com/markets/currencies/russian-central-bank-lends-more-chinese-yuan-under-currency-swap-operations-2024-03-30/" rel="nofollow" data-wpel-link="external">increased</a> Yuan-based transactions and indirect trade routes.</p> <p>In the wake of its 2022 invasion of Ukraine, U.S. and European sanctions imposed on Moscow have made it increasingly difficult for Russia to trade in Western goods and currencies. The sanctions, including the price caps on oil and petroleum products, have undercut Russia’s <a href="https://www.globalbankingandfinance.com/coinmetro-acquires-cryptocurrency-trading-licences-in-estonia/" title="CoinMetro Acquires Cryptocurrency Trading Licences in Estonia" data-wpil-monitor-id="7702" data-wpel-link="internal" rel="follow">economy</a> since they were imposed in early 2022. But Russia has, to an extent, evaded them or at least blunted their force.</p> <p>Meanwhile, Russia is also evading sanctions by importing products through middleman countries or exporting its oil on tankers that sail without Western insurance.</p> <p>It’s such scenarios that prompted former Assistant Secretary for Terrorist Financing and Financial Crimes Elizabeth Rosenberg, speaking <a href="https://home.treasury.gov/news/press-releases/jy1778" rel="nofollow" data-wpel-link="external">recently</a> at the Association of Certified Anti-Money Laundering Specialists Assembly Conference, to call on banks and companies to adopt “policies and systems to monitor, screen, and analyze trade and customs data to understand the underlying controlled goods their clients trade and correspondents facilitate.”</p> <p><b>A steep cost</b></p> <p>FIs and other firms are the frontline players in this effort, essential to ensuring that sanctions have their intended effect.</p> <p>But at the compliance level, the siloing of information within FIs can hinder prevention efforts. As Rosenberg explained, since many red flags of evasion mirror common money laundering red flags, sanctions compliance teams must break down silos between AML and sanctions compliance efforts to realize the value of information and insights for both.</p> <p>That means that financial institutions need their <a href="https://www.globalbankingandfinance.com/tag/anti-money-laundering-compliance/" title="anti-money laundering compliance" data-wpil-monitor-id="7703" data-wpel-link="internal" rel="follow">anti-money laundering and sanctions compliance</a> programs to collaborate and share resources. With respect to detecting sanctions evasion, both are concerned with monitoring some of the same kind of behaviors and actions that require sophisticated <a href="https://www.globalbankingandfinance.com/publishing-and-the-environment-compassiviste-publishing-says-change-is-possible/" title="Publishing and the Environment: Compassiviste Publishing Says Change Is Possible" data-wpil-monitor-id="7701" data-wpel-link="internal" rel="follow">technology</a> to sift out false positives as well as trained professionals who can make judgment calls.</p> <p>Enterprises that don’t break down barriers between the two programs risked “unwittingly, or inadvertently, processing payments for controlled goods and involving designated entities,” said Rosenberg. That’s why it is so urgent for financial institutions and <a href="https://www.globalbankingandfinance.com/pan-asia-bank-wins-two-prestigious-awards-from-global-banking-finance-review/" title="PAN ASIA BANK WINS TWO PRESTIGIOUS AWARDS FROM GLOBAL BANKING & FINANCE REVIEW" data-wpil-monitor-id="7699" data-wpel-link="internal" rel="follow">businesses</a> in all sectors to do their due diligence when it comes to policing themselves – because a failure to do so can result in stiff penalties in the form of steep fines, as well as loss of business and reputational damage if caught violating sanctions. Violators, meanwhile, can also face criminal penalties, including imprisonment.</p> <p>U.S. Deputy Attorney General Lisa Monaco described sanctions as the “new FCPA” and “recognized the critical need to enforce these sanctions with unprecedented intensity.” If that’s not enough to demonstrate regulators’ appetite for enforcement, OFAC in December was granted new authorities that allow it to place secondary sanctions on foreign financial institutions (FFI) found to have conducted or facilitated significant transactions involving Russia’s military-industrial base. This means OFAC can effectively eliminate a FFI’s access to the U.S. financial system based on sanctions violations.</p> <p><b>AI can help</b></p> <p>Despite increasing regulatory scrutiny and sanctions risk exposure, many financial institutions have maximized the effectiveness of legacy technologies while relying on inefficient manual processes that result in inaccurate results,<a href="https://www.pwc.com/us/en/industries/financial-services/library/sanctions-screening-automated-solutions.html" rel="nofollow" data-wpel-link="external"> according</a> to PwC. Instead, the consultancy suggested that firms integrate cutting-edge automated <a href="https://www.globalbankingandfinance.com/banking-on-security-one-finger-at-a-time-best-practices-for-biometric-security-solution-selection/" title="Banking on Security – One Finger at a Time: Best Practices for Biometric Security Solution Selection" data-wpil-monitor-id="7700" data-wpel-link="internal" rel="follow">solutions into their current technology</a> infrastructure.</p> <p>Generative AI enables better use of unstructured data by extracting context and insights that effectively automate <a href="https://www.globalbankingandfinance.com/igtb-and-outsideiq-partner-to-deliver-cognitive-computing-due-diligence/" title="IGTB AND OUTSIDEIQ PARTNER TO DELIVER COGNITIVE COMPUTING DUE DILIGENCE" data-wpil-monitor-id="7704" data-wpel-link="internal" rel="follow">due diligence around screening alerts to deliver</a> sound recommendations regarding matches. This accelerates the review and decision process, enhances the accuracy of those decisions, and reduces false positives in a way that would be nearly impossible for human investigators.</p> <p><img decoding="async" class=" wp-image-499028 alignleft" src="data:image/svg+xml,%3Csvg%20xmlns='http://www.w3.org/2000/svg'%20viewBox='0%200%20205%20146'%3E%3C/svg%3E" alt="" width="205" height="146" data-lazy-srcset="https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/Elizabeth-Callan-Headshot.webp 2100w, https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/Elizabeth-Callan-Headshot-496x354.webp 496w, https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/Elizabeth-Callan-Headshot-768x549.webp 768w, https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/Elizabeth-Callan-Headshot-1536x1097.webp 1536w, https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/Elizabeth-Callan-Headshot-2048x1463.webp 2048w" data-lazy-sizes="(max-width: 205px) 100vw, 205px" data-lazy-src="https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/Elizabeth-Callan-Headshot.webp" /><noscript><img decoding="async" class=" wp-image-499028 alignleft" src="https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/Elizabeth-Callan-Headshot.webp" alt="" width="205" height="146" srcset="https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/Elizabeth-Callan-Headshot.webp 2100w, https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/Elizabeth-Callan-Headshot-496x354.webp 496w, https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/Elizabeth-Callan-Headshot-768x549.webp 768w, https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/Elizabeth-Callan-Headshot-1536x1097.webp 1536w, https://www.globalbankingandfinance.com/wp-content/uploads/2024/06/Elizabeth-Callan-Headshot-2048x1463.webp 2048w" sizes="(max-width: 205px) 100vw, 205px" /></noscript>Querying through co-pilots or assistants, especially at an investigation level, also enables fast, automated information collection, synthesization, and insights to sanctions analysts. This proactive approach is crucial to avoid severe penalties, reputational damage, and potential criminal liabilities.</p> <p>As regulatory scrutiny intensifies, adopting AI-driven compliance measures is essential for preventing sanctions violations. It’s important to address, though, that where there are benefits to using AI, there are also risks. It’s up to financial institutions to be aware of those risks and employ proper governance.</p> <p><i>Elizabeth Callan is the AML & Sanctions Compliance and Risk Management SME at <a href="https://t.yesware.com/tt/6b514b0ef75d2f929756c90abeba805670a83c5a/660a9e3ae3017c9935448f67b9f27691/b2d016e6d2cbb27b34b9aed488591347/www.symphonyai.com/financial-services/" target="_blank" rel="noopener nofollow" data-saferedirecturl="https://www.google.com/url?q=https://t.yesware.com/tt/6b514b0ef75d2f929756c90abeba805670a83c5a/660a9e3ae3017c9935448f67b9f27691/b2d016e6d2cbb27b34b9aed488591347/www.symphonyai.com/financial-services/&source=gmail&ust=1718293118165000&usg=AOvVaw1b02u9lMrExF5BUDx7v0uZ" data-wpel-link="external">SymphonyAI Financial Services</a></i></p> <div class="social-sharing ss-social-sharing"> <a onclick="return ss_plugin_loadpopup_js(this);" rel="external nofollow" class="ss-button-facebook" href="https://www.facebook.com/sharer/sharer.php?u=https%3A%2F%2Fwww.globalbankingandfinance.com%2Fthe-threat-of-sanctions-evasion-creates-challenges-similar-to-those-in-aml-but-ai-can-help%2F" target="_blank" data-wpel-link="external">Share on Facebook</a><a onclick="return ss_plugin_loadpopup_js(this);" rel="external nofollow" class="ss-button-twitter" href="https://twitter.com/intent/tweet/?text=The+threat+of+sanctions+evasion+creates+challenges+similar+to+those+in+AML.+But+AI+can+help.&url=https%3A%2F%2Fwww.globalbankingandfinance.com%2Fthe-threat-of-sanctions-evasion-creates-challenges-similar-to-those-in-aml-but-ai-can-help%2F" target="_blank" data-wpel-link="external">Share on Twitter</a><a onclick="return ss_plugin_loadpopup_js(this);" rel="external nofollow" class="ss-button-linkedin" href="http://www.linkedin.com/shareArticle?mini=true&url=https%3A%2F%2Fwww.globalbankingandfinance.com%2Fthe-threat-of-sanctions-evasion-creates-challenges-similar-to-those-in-aml-but-ai-can-help%2F&title=The+threat+of+sanctions+evasion+creates+challenges+similar+to+those+in+AML.+But+AI+can+help." target="_blank" data-wpel-link="external">Share on Linkedin</a> </div> <script>var elements = document.querySelectorAll('.broken_link'); elements.forEach(function(element) { element.classList.remove('broken_link'); });</script> </div><!--mvp-content-main--> <div id="mvp-content-bot" class="left"> <div class="mvp-post-tags"> <!-- <span class="mvp-post-tags-header">Related Topics:</span> --> <span itemprop="keywords"></span> </div><!--mvp-post-tags--> <div class="posts-nav-link"> </div><!--posts-nav-link--> <div id="mvp-author-box-wrap" class="left relative"> <div class="mvp-author-box-out right relative"> <div id="mvp-author-box-img" class="left relative"> <img alt='' src="data:image/svg+xml,%3Csvg%20xmlns='http://www.w3.org/2000/svg'%20viewBox='0%200%2060%2060'%3E%3C/svg%3E" data-lazy-srcset='https://secure.gravatar.com/avatar/34cbdf566fdda850dda0ac88a2b79f1f?s=120&d=mm&r=g 2x' class='avatar avatar-60 photo' height='60' width='60' decoding='async' data-lazy-src="https://secure.gravatar.com/avatar/34cbdf566fdda850dda0ac88a2b79f1f?s=60&d=mm&r=g"/><noscript><img alt='' src='https://secure.gravatar.com/avatar/34cbdf566fdda850dda0ac88a2b79f1f?s=60&d=mm&r=g' srcset='https://secure.gravatar.com/avatar/34cbdf566fdda850dda0ac88a2b79f1f?s=120&d=mm&r=g 2x' class='avatar avatar-60 photo' height='60' width='60' decoding='async'/></noscript> </div><!--mvp-author-box-img--> <div class="mvp-author-box-in"> <div id="mvp-author-box-head" class="left relative"> <span class="mvp-author-box-name left relative"><a href="https://www.globalbankingandfinance.com/author/jcp/" title="Posts by Jessica Weisman-Pitts" rel="author follow" data-wpel-link="internal">Jessica Weisman-Pitts</a></span> <div id="mvp-author-box-soc-wrap" class="left relative"> </div><!--mvp-author-box-soc-wrap--> </div><!--mvp-author-box-head--> </div><!--mvp-author-box-in--> </div><!--mvp-author-box-out--> <div id="mvp-author-box-text" class="left relative"> <p>Jesse Pitts has been with the Global Banking & Finance Review since 2016, serving in various capacities, including Graphic Designer, Content Publisher, and Editorial Assistant. 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