A Guide to the Critical Need for Autonomous Sanctions Screening

Picture this: A country unilaterally asserts its foreign policy by imposing sanctions without the need for any international regulatory body approval. It’s not just a hypothetical scenario; it’s a rapidly unfolding reality of autonomous sanctions. Unlike multilateral sanctions mandated by international bodies, these autonomous measures empower independent nations to target specific sectors, individuals, and entities to change their behavior, acting outside the internationally approved restrictions.

Therefore, having an understanding of their distinct nature is a necessity for businesses at a global level. As countries may impose autonomous sanctions for their own economic and political reasons, however, this fragmented landscape can pose certain compliance challenges for the financial institutions operating across borders.

What are Autonomous Sanctions?

Autonomous sanctions are the penalties that national governments impose independently on individuals and entities based on their own foreign policy objectives. These measures are implemented in addition to compliance with obligations under  international bodies such as the United Nations Security Council (UNSC).

Which Countries Have an Autonomous Sanctions Regime?

The realm of autonomous sanctions is growing, with an expanding number of 43 countries that implement these independent national measures to advance their foreign policies. Some of the advanced economies that have an autonomous sanction regime are:

• The United States, Canada, Australia, and the United Kingdom frequently impose autonomous sanctions in response to geopolitical conflicts and to address issues such as terrorism and human rights abuses.
• Several EU member states, such as France and Poland, have their own autonomous sanctions list. For businesses, this means that adhering to EU sanctions alone is not enough. They must obey the national-level sanctions list of the jurisdictions in which they are operating to avoid breaches.
• Japan, South Korea, Singapore, Switzerland, New Zealand, and Taiwan often use an autonomous sanctions regime, especially in response to events such as the Russia-Ukraine War.
• China imposes autonomous sanctions act through its Anti-Foreign Sanctions Legislation, offering a way to resist foreign sanctions.

These domestic-level sanctions lists are based on a particular country’s own political goals, which usually don’t match those of other nations. For instance, the names in France’s National Freeze Register typically do not appear in the EU list. Similarly, on Switzerland’s list, some of the missing names are visible in the EU list. This illustrates how countries, even in the same region, have different sanctions lists.

Why are Autonomous Sanctions Imposed?

Sometimes, sanctions imposed by regional or international organizations may not align with the specific goals of a country; therefore, they need to act based on their own economic and foreign policy objectives to impose autonomous sanctions.

A clear example of this is autonomous sanctions regimes of some EU member countries, despite the presence of regional-level EU sanctions. One of the perfect illustrations of why the European countries may not always act together is evident from the dispute concerning gas drilling operations in the Mediterranean Sea, near Cyprus. In the year 2019, Turkey’s government started looking for gas in that area without any permission.

This act alarmed the European Union countries such as France and Greece for which EU decided to impose sanctions on Turkiye. However, only two individuals were sanctioned because Hungary and Bulgaria did’nt agree on restrictions against Istanbul.

This clearly demonstrates that businesses operating within the EU should not rely solely on sanctions issued by the European Union. They must check other country’s list too as there are certain nations that might have separate or additional sanctions.

EU Council Sanctions Vs National Autonomous Sanctions

Autonomous sanctions differ from the UN and EU lists as they are imposed independently, necessitating distinct screening, often driven by national political or startegic priorities. Within the European Union, its often assumed that sanctions adherence is harmonized across all member states.  But this is not always the case as countries like Poland or France also have their autonomous sanctions lists, targeting specific individuals and entities.

This presents a considerable compliance challenge for FIs, especially those with multi-jurisdictional operations. Depending solely on EU-wide sanctions can lead to missed designations, creating regulatory or reputational risk.

Even the non-EU countries, such as Switzerland, maintain autonomous sanctions regimes that might be different from the EU’s. Therefore, to stay safe and avoid penalties, it is necessary to check different lists, including the ones from the individual countries, because they have autonomous sanctions regulations.

Challenges in Complying with Autonomous Sanctions Regimes

Compliance is no longer optional for organizations that are engaged in international financing and trading operations; it’s a necessity. Here is the reason why:

Dual-Risks

Autonomous sanctions broadens the risk landscape for the businesses. Businesses operating in jurisdiction with autonomous sanctions face risks of violation of multiple sanction regimes. In addition to the international sanctions such as UN, they need to be aware and compliant with national sanctions of jurisdictions in which they operate.

Multiple Jurisdictions

Businesses often operate across numerous jurisdictions, each of which has its own distinct measures. The transactions that are not subject to EU council sanctions or UN security council sanctions might be banned within the autonomous regime, depending on specific reasons of the jurisdiction that has issued those sanctions.

Evolving Nature

Sanctions lists are continuously evolving, with some countries updating their lists more frequently than others. Staying current with these updates, including additions and removals, is essential in maintaining effective compliance. Additionally, variations in name spellings across different languages can make screening even more challenging. It can result in missed matches or flagging the wrong individual if they are detected through an ineffective screening system.

Unintended Violations

If the global businesses are not aware of comprehensive screening, they will unintentionally get involved with sanctioned entities and individuals if they are not on the broader international lists. This can ultimately disrupt the business operations.

Key Compliance Gaps for Autonomous Sanctions Regime

Here are some key compliance gaps for the autonomous sanctions regime:

Inconsistent Data

The variation in data formats, identifying information such as spelling or aliases, and update frequencies across different national lists complicate the automated screening of sanctioned entities. As a result, the risk of false negatives increases significantly.

Ambiguous Regulations

Some autonomous regimes often lack transparency in guidance, creating uncertainty about whether a transaction or relationship is subject to sanctions.

Additionally, this ambiguity of regulations leads to differing interpretations and implementations of similar sanction rules across various jurisdictions. This is quite challenging for global businesses to follow these rules.

Ongoing Updation

As the autonomous sanctions lists are continuously updated, with new entries and existing ones being removed, it poses a challenge for the screening systems and the internal databases to keep up with it.

Operational Complexity in Europe

In Europe, SEPA Instant Payments demand from the FIs to proceed with the transactions within 10 seconds. What if the system is not eligible to provide the financial institution services within this time frame? Obviously, their payments get blocked or removed. This delay in payments can not only affect the customer experience but also the company’s image. To counter this challenge, it is necessary for the banks and other FIs to have real-time intelligent screening systems that can keep pace with instant transactions.

Gain Real-Time Updates with AML Watcher

With the expansion of autonomous sanctions; relying solely on the EU, UN or OFAC lists can be a challenging because countries like Poland, France, Switzerland and China impose their own sanctions based on domestric priorities. To stay ahead of the curve FIs require an effective AML compliance solution.

AML Watcher will be your guide in this way. It empowers your business to tackle all significant challenges and ensure complete screening through:

• Real-Time Monitoring  (Instantly updates sanctions lists from DFAT, Global Affairs Canada, OFAC, UK HMT, EU CFSP)
• Multi-Jurisdictional Screening (Screens against Canadian, US, UK, EU, APAC, and Australian autonomous sanctions regimes, including thematic laws)
• Data updation (Ensures compliance teams always get the updated data as it is refreshed information after every 15 minutes)
• Multiple Language Access (Support for over 80+ languages)
• In-house Expert Teams (Provides tailored and jurisdiction-specific insights to reinforce your compliance workflow)
• Thematic Tagging  (Flags listings by reason)
• Contextual Matching and Risk Scoring  (Factors in aliases, nationality, sanction type, and industry contexts)
• Audit Trails and Reporting (Automatically records date, time, result of a check or review, additional comments, and observations of analysts)
• Regime Change Alerts (Alerts teams when any jurisdiction expands criteria)