Aircraft Screening is Mandated for the Airline Industry, Why?

Can SANCTIONS take flight with aircraft? 

Are the skies just as vulnerable to SANCTIONS as the ground?

On the 24th of February 2022, nobody could have predicted that the unexpected Russian invasion of Ukraine would not only change the decades-old geopolitical dynamics but also bring about massive alterations in the aircraft and aviation sanctions frameworks.

Extensive political and economic sanctions by the major countries followed the Russian invasion of Ukraine. Regulatory bodies impose sanctions not only in the skies or ground but in the waters as well.

A few days after the invasion, the European Union as well as other Western powers banned Russian carriers of all kinds from accessing airports and from overflying airspace.

They also banned the export to Russia of goods and technology from the aviation and space industries to condemn the Russian invasion.

The EU also sanctioned airlines and planes belonging to Russia. Any kind of air travel over, into, or out of the territories of EU countries is prohibited. 

This highlights the increasing focus on stricter sanctions within the aviation sector. Read this article to explore how the aircraft industry contributes to higher money laundering risks, why the industry must comply, the consequences of failing to screen, and key international aircraft sanction lists.

Why Is the Aircraft Industry Required to Comply With International Sanctions?

The banking sector is perhaps the first thing that comes to mind when considering sanctions, and anti-money laundering regulations. However, the implementation of sanctions has now expanded beyond our expectations.
The much-needed focused addition is the aviation industry which is subject to continuous aircraft screening and compliance with international regulatory laws. The aircraft industry is at a crossroads in terms of the effective implementation of these sanction regulations.

In contemporary politics, sanctions have become the go-to foreign policy instrument. For states around the world, these sanctions are considered less costly to achieve their foreign policy objectives, and help governments avoid direct military intervention. 

In an attempt to target Russia’s key industry and put pressure on its economy for violating international law, as well as threatening international security and stability by invading Ukraine, major powers and key international regulatory bodies sanctioned the Russian aircraft industry.

The airplane industry throughout the world has no choice but to comply with international sanctions or else they are subject to massive legal repercussions by the international regulatory bodies.

How Sanction Evasion in the Aircraft Industry Enables Money Laundering?

Sanction evasion is directly proportional to the risk of money laundering and terrorism financing.  A classic example of it is the sanctioning of Iraq based Al-Nasir Airline for acting as a front company to help the sanctioned Iranian company called Mahan Air and violating U.S. sanctions.

According to the U.S. Department of Justice, Al-Naser Airlines, Syrian entrepreneur Issam Shammout, and his UAE-based company Sky Blue Bird Aviation broke U.S. Executive Order (E.O.) 13224, which governs counterterrorism, by engaging in intricate financial practices that made it possible for illegal funds to enter the financial system.

Once acquired, these assets can be sold, leased, or used, giving funds gained illegally a false sense of legitimacy.

As per the report by The Wall Street Journal, airports around the world, including the United States, do not screen passenger baggage for cash due to the high cost of equipment and staff required.

The Heathrow-to-Dubai flights have two big money-laundering features: One airport doesn’t scan outbound luggage for cash and the other welcomes sacks of it.

Wall Street Journal

Most governments are not concerned with the flow of money (of doubtful origin) into their regions, nor do they have a policy of reporting people who bring in large sums of cash in their luggage.

This loophole enables billions in cash to flow into and out of the United States each year to countries that have weaker AML Laws.

Why Do Sanctions Lists Matter To The Aviation Industry?

Effective sanctions screening must be implemented by all companies across all industries to identify clients who are included on sanctions lists.

This is essential to avoid facing harsh legal repercussions for violating any penalties that have been put in place, such as:

• Taking money from someone who is under sanctions
• Carrying a person who has been banned from traveling
• Operating any aircraft owned by a sanctioned organization

What Happens if an Airline Carries a Person Under Sanction?

If an airline chooses to violate international sanctions, for the regulatory authorities, it will be subject to a travel ban. Moreover, it will be considered complicit with the sanctioned entities or individuals.

For example, back in November 2022, the OFAC sanctioned Malta and Russia-based Emperor Aviation Ltd. and 7 related aircraft for having coordinated luxury travel for Suleyman Kerimov’s family, Putin’s close ally.

As in the case of Russia’s invasion of Ukraine, sanctions assist the international community in isolating the targeted state and forcing it to cease its aggressive actions. Usually, the country imposing the sanctions also breaks off diplomatic ties.

The targeted nation is excluded from international accords and institutions when it is subject to international sanctions. and imposing a travel ban on the targeted nation’s state officials and leaders.

Changing the targeted nation’s foreign policy, military activities, or political rhetoric is the main goal of any sort of sanction.

What Are the Primary Sanctions Lists For the Aircraft Industry?

Different jurisdictions release their own sanction lists to meet their own foreign policy agendas. Therefore, the names of sanctioned individuals vary from country to country.

Since the airline industry works on international levels, therefore, they need to stay compliant with all watchlists released by international organizations as well as individual countries.

Sanctions List by OFAC

Under the U.S. Department of Justice, the OFAC issues the most comprehensive and updated list of sanctions in the world, which is extensively utilized around the world.

It also maintains the SDN and Non-SDN List. Being included in the SDN List meant the individual could be a potential threat to America’s national security.

U.S. allies are prohibited from conducting any business with them, and their foreign assets are confiscated.

Sanction List by EU

Within a few days of the Russian invasion, the EU updated its comprehensive list of EU financial sanctions against Russia.

Compliance with this list is mandatory for all individuals and corporations working within both the public and private sectors of the European Union.

Travel Ban List by EU

The EU also has its own list of individuals banned from traveling within EU territories. This list contains all individuals who are subject to EU sanctions and travel restrictions.

Those on the list are not permitted to visit any European Union member states or go beyond the borders of their own country if they are EU citizens.

HM Treasury List By the United Kingdom

Under His Majesty’s Treasury (HM Treasury), the Office of Financial Sanctions Implementation (OFSI) has its own sanction list in line with the foreign policy of the United Kingdom.

The list comprises names subject to financial sanctions under the Sanctions and Money Laundering Act passed in 2018.

The HM Treasury List includes people who are a threat to UK national security by being involved in acts of terror, corruption, money laundering, drug trafficking, human trafficking, abuse of human rights, etc.

Switzerland’ SECO Sanctions List

The State Secretariat for Economic Affairs has its own set of sanctions list of sanctioned planes, individuals, corporations, and countries, maintained by the Federal Council.

Swiss sanctions may, for example, limit transactions in goods and services, payment and cash or in-kind transfers, human migration, and scientific, technological, or cultural exchanges.

The imposed measures may also include prohibitions, licensing and reporting requirements, and other rights restrictions. Noncompliance with sanctions can result in serious legal and financial fines.

Canadian Sanction List

Canadian sanctions target governments, individuals, or businesses responsible for corruption, terrorist activities, executions, torture, and other serious abuses of human rights.

These measures can limit or ban trade, financial transactions, or other economic activities, as well as seize or freeze any property located in Canada.

Sanctioned foreign nationals may be denied entrance into Canada under the Immigration and Refugee Protection Act.

Australian Sanctions List

The Consolidated Australian Sanctions List includes all individuals and companies subject to Australian sanctions regulations. In general, financial fines can be imposed on entities, as well as on individuals.

Any behavior related to a sanctioned person or entity may be considered a significant criminal crime. Noncompliance with sanctions carries a penalty of up to ten years in prison for individuals and significant fines for corporations.

Interpol Red Notice

While Interpol’s Red Notices are not officially part of sanctions lists, they are still crucial for screening individuals, including aircraft crew and passengers, due to their relevance in identifying individuals wanted for serious crimes.

However, Red Notices are not legally binding like sanctions lists, which directly restrict financial transactions and trade.

The International Criminal Police Organization is an intergovernmental organization that assists police forces throughout the world in increasing safety by sharing data on crimes and criminals.

A Red Notice is not an arrest warrant but a request for international cooperation, asking member countries to locate and provisionally arrest an individual sought for serious crimes.

It is designed to aid in global law enforcement efforts but does not carry the same legal weight as an official arrest warrant.

Red Notices are often disseminated publicly to help identify and apprehend individuals sought for serious crimes, but they are not legally enforceable like sanctions lists.

The public release aids in global awareness and the identification of persons who may be a threat to security.

How Can Aircraft Industry Comply With International Sanctions?

To understand why compliance with aircraft screening could be challenging for the airplane staff, let’s say there is an American business charter air service that understands the importance of complying with international regulations and prioritizes its compliance in its operations.

It provides air service to millions of passengers and every time a passenger books a ticket, their airline booking services need to cross-check and screen their names against hundreds of watchlists from around the world.

Now this meticulous screening especially when done manually gets extremely complex and challenging given different sanctions are imposed on people belonging to different jurisdictions. Therefore, every passenger needs to be screened and cross-checked effectively.

Minor negligence in terms of screening passengers could result in millions of dollars of legal penalties against the airline company.

Now see how the Russian invasion has spiked the number of sanctioned individuals. Before 24th Feb 2022, the number of sanctions against Russian citizens was 2,754 (due to the Russian invasion of Crimea in 2014).

After the Russian invasion of Ukraine, the number of Russian-sanctioned individuals has soared to 11,500+ which will continue to rise given the unceasing war.

Also, the fact that this sanctions screening protocol not only includes sanctions against Russian lists but airline services are mandated to be aware of sanctioned individuals from any region of the world. It could also be a person on the FBI’s “no-fly list” in the United States.

Need to screen individuals and entities throughout the world.

How, therefore, can aviation agencies adhere to sanctions screening protocols in terms of sanctioned aircrafts as well as sanctioned passengers?

How AML Watcher Can Help Aviation Comply With Aircraft Screening?

AML Watcher ensures the aviation industry complies with the complex requirements of international sanctions by optimizing and reinforcing compliance with aircraft sanction screening.

It can help meet those standards:

Sanction List Integration

AML Watcher ensures thorough coverage for compliance by integrating with several international sanction lists. Among these lists are:

• OFAC (U.S. Department of Treasury’s Office of Foreign Assets Control)
• EU Sanctions List
• UN Sanctions List
• UK Sanctions List
• World Bank Sanctions List
• Interpol’s Most Wanted List
• FATF (Financial Action Task Force) List of High-Risk and Non-Cooperative Jurisdictions, and more.

Aircraft and Vessel Screening

AML Watcher facilitates aircraft and vessel screening, which detects that organizations engaged in marine and aviation activities have no affiliations to high-risk or sanctioned parties by checking them against international sanctions lists.

Risk-Based Assessment

AML Watcher offers tools for conducting a risk-based assessment of entities involved in aircraft operations, allowing you to assess the level of risk associated with each relationship and transaction and prioritize actions based on the severity of the risk.

Accurate Name Match Screening

AML Watcher utilizes sophisticated name-matching algorithms to compare the names of individuals or entities involved in airplane transactions with those on sanctions lists (such as those maintained by the UN or OFAC).

AML Watcher minimizes false positives through refined matching techniques, ensuring that only valid matches are highlighted, which simplifies the compliance review process.

Real-Time Transaction Monitoring

AML Watcher offers real-time monitoring to flag questionable or high-risk activity and ensures that financial transactions and sanctioned companies linked to aircraft operations are not supporting money laundering or sanctions breaches.

Ongoing Screening for Compliance

AML Watcher’s ongoing monitoring ensures that new developments, such as changes to sanctions lists, are automatically applied to previously screened entities, keeping your compliance up to date at all times.