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Why Third-Party Due Diligence Is Crucial For Sanctions

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Introduction

Recently, CNBC reported that The Netherlands is expanding its export restrictions on “advanced” semiconductor manufacturing equipment, following U.S. pressure to prevent the transfer of high-tech machines to China. The move aims to ensure that China does not gain access to advanced chip technology with potential military and AI applications, aligning with U.S. concerns about national and international security. In other words, amidst the shifting geopolitical landscape, sanctions have become an important tool making sanctions screening a critical compliance requirement for businesses.

Sanctions screening serves as a pivotal control mechanism within Financial Institutions (FIs) to both detect and mitigate the multifaceted risks associated with international sanctions. It is a linchpin of an effective Financial Crime Compliance (FCC) program, offering a strategic vantage point for the identification of sanctioned entities, individuals, and potential illicit activities that FIs may unwittingly encounter.



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