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Sanctions Regulations definition and meaning | AML glossary

What are sanctions regulations? Definition and AML compliance meaning.

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Sanctions regulations definition: What it means in AML compliance.

Sanctions regulations are laws and measures imposed by governments or international bodies to restrict dealings with specific individuals, entities, countries, or sectors. These restrictions aim to enforce foreign policy objectives, combat terrorism, prevent the proliferation of weapons, and disrupt criminal networks.

Examples of sanctions regulations.

  • UK sanctions regulations: Under the Sanctions and Anti-Money Laundering Act 2018, the UK enforces a range of financial, trade, and immigration sanctions through Office of Financial Sanctions Implementation (OFSI).
  • EU sanctions framework: The European Union enforces restrictive measures against countries like Russia, Iran, and North Korea, including asset freezes and export bans.
  • US sanctions by Office of Foreign Assets Control (OFAC): The Office of Foreign Assets Control administers and enforces economic and trade sanctions, such as the Specially Designated Nationals (SDN) List.
  • UN sanctions: The United Nations Security Council imposes global sanctions regimes targeting terrorism financing, arms proliferation, and state threats.

These regulations are updated frequently and may apply to individuals, legal entities, vessels, aircraft, and more.

Who must comply with sanctions regulations?

Compliance is required across a broad range of sectors, including:

  • Financial institutions
  • Law firms and accountancy practices
  • Crypto and fintech companies
  • Logistics and import/export businesses
  • Real estate and luxury goods dealers

Any direct or indirect dealings with a sanctioned party – even unintentionally – can lead to regulatory breaches.

Common challenges in sanctions compliance.

  • Frequent changes: Sanctions lists are dynamic, often updated without much warning.
  • False positives: Similar names, aliases, or transliterations can result in flagged matches.
  • Complex structures: Sanctioned ownership can be hidden through layers of shell companies.
  • Jurisdictional conflicts: US, UK, and EU rules may differ, creating legal tension.

Enforcement trends and real-world examples.

Regulators are increasing enforcement, with significant penalties issued for breaches:

  • OFSI fined Wise Payments £7.6 million in 2023 for dealing with a sanctioned individual.
  • OFAC issued over $1 billion in civil penalties in 2022, including a $508M fine against Standard Chartered Bank.
  • Firms may also face public naming, loss of banking partners, and criminal investigation.

How technology can support sanctions compliance.

To manage risk and reduce manual effort, firms can use compliance tools to:

  • Screen clients and transactions against global watchlists in real-time.
  • Automate alerts when sanctioned parties are detected.
  • Maintain detailed audit trails to prove compliance.
  • Continuously monitor changes to sanctions regimes across jurisdictions.

Technology enables faster identification of threats and stronger assurance when dealing with international clients or third parties.

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