U.S. Sanctions Hundreds More Foreign Entities: How Compliance Teams Can Handle the Surge in Volume and Complexity 

On May 1, 2024, the United States imposed sanctions on multiple companies in China as well as Azerbaijan, Belgium, Russia, Slovakia, Turkey, and the UAE – nearly 300 in all – for their support of Russia’s war in Ukraine.  “The almost 300 targets being sanctioned by both Treasury and the Department of State include sanctions on dozens of actors that have enabled Russia to acquire desperately needed technology and equipment from abroad,” said the Treasury Department in its news release.   

Compliance operations teams within banks and other financial services firms have experienced this type of black swan event before – most recently when Russia invaded Ukraine in 2022 and several times since then. Each time such an event occurs, compliance teams quickly get overwhelmed. “Keeping up with sanctions and politically exposed persons (PEP) lists are challenging enough under normal conditions,” said Art Mueller, Vice President of Financial Crime at WorkFusion in a recent article in BAI Banking Strategies. “Being able to scale your operations for the next black swan event…is critical to an effective and efficient program.” 

This is especially true in the increasingly multi-nation combative environment. China fired back at talk of U.S. sanctions in late 2023 and is already doing the same in 2024. “China will take all necessary measures to resolutely uphold the legal rights and interests of Chinese companies,” said the China foreign ministry spokesman in response to the May 1st sanctions announcement by the U.S. “The Chinese side urges the US to stop smearing and containing China and stop wantonly implementing illegal and unilateral sanctions.”  

Compliance teams need to face the alert volume realities 

Research with our banking customers shows that a typical sanctions alert review analyst can work 200–300 alerts per day at high levels of quality. When alert volumes spike from such black swan events, an individual analyst would need to work upwards of 500–800 alerts per day to ensure the bank is keeping pace with alert volumes. Handling that many alerts per day is not sustainable for any analyst. “To staff up and meet the new volume levels would require an FI to increase analyst head count by approximately 100-200%,” noted Art Mueller. “That’s prohibitively expensive.” 

The shortage of full-time analyst staff, whether due to hiring freezes or the general lack of L1 analyst availability, results in FinCrime compliance teams becoming massively overwhelmed. Following black swan events, a FinCrime L1 analyst typically has just 15–30 seconds to review each alert generated by their sanctions screening tools. That’s not enough time for a person to perform a high-quality evaluation and disposition a sanctions alert.  

So, what happens when L1 analysts are so pressed for time? Some strive to keep pace with alerts by rushing through their work, eventually making careless mistakes. Others simply give up on quality, in favor of rapidly clicking through alerts. In the end, the multitude of inadequate alert reviews enables sanctioned parties to perform their devious acts without getting noticed.  

The situation is exacerbated by mismatched sanctions lists between countries in different regions of the world. Even EU- and U.S.-originated sanctions lists vary from each other. Ali Ahmadi, an executive fellow at the Geneva Centre for Security Policy, recently noted that the U.S. and the EU “certainly cooperate with each other a lot, but there are entities that are on one sanctions list, not on the other”. 

Tackle sanctions complexity with technology

Relying on people to sift through thousands of alerts per day in hopes of finding those few needles in the haystack that pose real risk is wasteful and often fruitless. As such, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) recently called out the availability and use of emerging sanctions compliance technologies and solutions in its guidance to manage this type of challenge. OFAC stated, “Technology solutions for sanctions compliance, which have advanced significantly in recent years and become more scalable and accessible, can be leveraged to help mitigate a financial institution’s sanctions risk, including with respect to instant payment systems.” This is where banks and other FIs should be putting artificial intelligence (AI) to use. 

 AI Digital Workers, designed and created specifically for FinCrime compliance, represent the ideal type of technological solution referenced by OFAC. Digital Workers quickly and automatically review and disposition millions of L1 sanctions alerts per year, escalating to people (L1 or L2 analysts) only the alerts that indicate the greatest risk. Suddenly, an L1 analyst team is relieved of the burden of having to review an overwhelming volume of alerts. Moreover, when they receive an escalated alert, they treat it with far greater care because they know it has been escalated from an AI Digital Worker with insights. 

Two of WorkFusion’s AI Digital Workers that focus on sanctions screening, Tara and Evelyn, enable FIs to immediately improve capacity, future-proof their sanctions alert review operations, and reduce risk liability. The benefits are many during a black swan event, including: 

  • Sanctions alerts are largely adjudicated by the Digital Workers, and the existing team of analysts can be more effective while operating in a business-as-usual environment. 
  • Compliance Ops managers can avoid overburdening their team as the Digital Workers clear false positives and allow the team to focus on the rare risk investigations. 
  • Service to customers can remain high, even as external turmoil grows exponentially.  
  • Compliance teams can feel confident that they are prepared to handle any ‘black swan’ event. 

Delivered to FIs as either SaaS or software, the digital workforce keeps compliance operations flowing in a manner that is location-agnostic, volume-agnostic, and easily scalable across the enterprise. 

To learn more about preparing your compliance teams for the increasingly common occurrence of black swan events that impact compliance operations, visit workfusion.com today.  

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