Sanctions screening
Sanctions screening is checking customers, counterparties and transactions against official sanctions lists so a firm does not deal with designated persons or with entities they own or control. In the US, OFAC can impose civil penalties on a strict liability basis, so a missed match can be a violation even without knowledge.
This page explains the rules in general terms and is not legal or regulatory advice. Check the primary source and take advice on how the rules apply to your firm.
Jurisdiction: United States: OFAC regulations, 50 Percent Rule guidance (FAQs 398 to 402) and reporting under 31 CFR 501.603 and 501.604. United Kingdom: OFSI general guidance. European Union: Article 5d of Regulation (EU) No 260/2012, inserted by Regulation (EU) 2024/886.
How it works
OFAC publishes the Specially Designated Nationals and Blocked Persons List (SDN List). Under its 50 Percent Rule, an entity owned 50 percent or more in aggregate by one or more blocked persons is itself blocked, even if it is not listed; control without that ownership does not trigger automatic blocking. Blocked property and rejected transactions must be reported to OFAC within 10 business days.
In the UK, the Office of Financial Sanctions Implementation, part of HM Treasury, implements financial sanctions, and the FCDO publishes the UK Sanctions List. Asset freezes extend to entities owned or controlled by a designated person, including where that person holds more than 50% of the shares or voting rights. In the EU, the Instant Payments Regulation requires providers of instant euro transfers to check their own customers against EU asset freezes at least once every calendar day and immediately after new or amended designations, and bars them from also screening the payer and payee of each instant transfer for those measures. Checks for other restrictive measures and anti-money laundering duties still apply.
OFAC expects a risk-based compliance programme with five components: management commitment, risk assessment, internal controls, testing and auditing, and training. Among the root causes of past violations, OFAC lists screening software not updated for list changes, missing SWIFT BICs of sanctioned banks and failure to account for alternative spellings of names.
Example
A payout file holds 10,000 recipients and the screening tool flags 42 potential matches. Analysts clear 40 as false positives using date of birth and address. They block one payment that matches an SDN entry and a second payment to a bank owned 25% each by two blocked persons, because that bank is itself blocked under the 50 Percent Rule. Both are reported to OFAC as blocked property within 10 business days.
Frequently asked questions
Do we need to check an entity that is not on any list?
Yes, if listed persons could own it. OFAC adds stakes together: two blocked persons owning 25% each make the entity blocked.
Does the EU instant payment rule mean instant transfers are not screened?
Providers check their own customers against EU asset freezes daily and whenever designations are added or amended, instead of screening each instant euro transfer for those measures. Checks for other restrictive measures and their anti-money laundering duties still apply.
Where Polynopsis fits
Polynopsis does not screen customers or transactions. It focuses on liquidity: where a payment company's money is and how long each corridor will last.
Related terms
Sources
- OFAC FAQs: Entities owned by persons whose property and interests in property are blocked (50 Percent Rule) · Office of Foreign Assets Control, U.S. Department of the Treasury
- Introduction to the Office of Foreign Assets Control · Office of Foreign Assets Control, U.S. Department of the Treasury
- A Framework for OFAC Compliance Commitments · Office of Foreign Assets Control, U.S. Department of the Treasury
- UK financial sanctions general guidance · Office of Financial Sanctions Implementation, HM Treasury
- Regulation (EU) 2024/886 on instant credit transfers in euro · EUR-Lex, Publications Office of the European Union
Know where all your money is.
Polynopsis gives cross-border payment teams one live position across every bank, payout partner, exchange and wallet, including money in flight, and warns before a corridor runs dry.
About Polynopsis
Polynopsis is liquidity management software for cross-border payment companies. The name joins poly, many, and synopsis, a seeing together: one live view of money spread across many banks, payout partners, exchanges and stablecoin wallets, including money in flight, with a warning before any corridor runs dry.
Why it is called Polynopsis · About Polynopsis · Glossary · Corridor runway calculator