In recent years, the financial industry has seen a significant increase in the number and size of penalties for sanctions violations. Many larger financial institutions have been subjected to these penalties for sanctions circumvention – i.e., disguising the involvement of a sanctioned customer in a transaction.
Financial institutions use a variety of methods to commit sanctions circumvention. For example, banks obscure customer identities by amending information in wire transfers, using shell companies, and routing payments in highly complex ways. From these methods, we have identified eight “typologies” commonly used by financial institutions to circumvent sanctions, as well as red flags that are associated with each typology.
This Financial crimes observer provides our analysis of the eight sanctions circumvention typologies and what financial institutions should be doing now.