Key Aspects

17 Companies, from Finance to Tobacco got a total of USD 1.54 billion worth of fines in 2023, including the tech giant Microsoft. 

Too many institutions forget that having great screening tech is JUST one aspect of a quality sanction observance. Having great Reference Sanctions data is as crucial as the Software. 

Institutions will be surprised to learn how many sanctions they miss by relying on decades old legacy infrastructure.

It wasn’t an accident that, OFAC in December 22, 2023  communication has emphasized adopting adequate supplementary new resources “in addition to baseline customer due diligence (CDD) procedures and other anti-money laundering controls” already in place. 

Embracing the Future: Why Legacy Detection Systems are No Longer Sufficient

The landscape of financial compliance and sanctions screening is evolving rapidly, with recent penalties imposed by the Office of Foreign Assets Control (OFAC) underscoring a crucial message: companies can no longer rely on old-style detection systems. In an era where financial regulations and sanctions are complex and ever-changing, relying on outdated methods is not just inefficient—it's a liability.

Remediation: 

• Institutions shall have critical approach to their legacy infrastructure, and challenge the providers with complex cases;
• Make sure your legacy provider sees more than the mere “Sanction List” and analyzes all the Collateral Sanction Exposure where the real risk resides;
• Best Practice approach now is to have two providers of sanction lists to back up the inevitable blind spots. 
• The Back-Up policy is also often well seen by auditors and regulators as “obligation of means” approach. 

The Cost of Non-Compliance: A Wake-Up Call from OFAC

The Civil Penalties Information Chart released by OFAC reveals a staggering amount of fines levied against various corporations in 2023. Let's look at some of these penalties:

• Binance: Faced a monumental fine of $968,618,825.
• British American Tobacco p.l.c.: Incurred a penalty of $508,612,492.
• Wells Fargo Bank, N.A.: Fined $30,000,000.
• Microsoft Corporation: Penalized with $2,980,265.86.

These are not just numbers; they represent a simple reality that having even the overmarketed legacy providers will not be sufficient to justify the lack of results. 

For details on all fines in 2023, please click here. 

Software is Only Part of the Game: The Need for a Comprehensive Approach

The key takeaway from these penalties is that software alone is insufficient in the fight against financial crimes and sanctions violations. What companies need is a holistic approach that includes:

• Next Generation Sanction Screening Data: Automatically updated large datasets with deep insights going behind the mere “lists” towards Collateral Exposure links. 
• Advanced Algorithms: Leveraging AI and machine learning can help in identifying complex patterns that traditional systems might miss. 
• Robust Compliance Framework: A strong internal culture of not replying on “box ticking” tech. 

Conclusion: Investing in Advanced Technologies is Not Optional Anymore

The penalties imposed by OFAC in 2023 serve as a stark reminder that relying on legacy tech is not any more sufficient.

As you upgrade your systems, software and providers- consider also the data!

For assistance to understand and assess how Polixis can help your organization with implication of additional specialised tools and processes please contact Gareth Spiers at: +41 22 340 22 00 or at team (at) polixis.com.