Risks associated with violations of economic sanctions are nowadays among the key risks for business, particularly for companies with extensive supply chains, operating in multiple countries, or active in the import or export sector. What more, recently these actions (or omissions) of businesses regarding economic sanctions have increasingly become the subject of interest for supervisory authorities, as well as law enforcement agencies. On a daily basis, we encounter cases where cooperation between our Clients and specific entities, or the export of certain goods, becomes subject to verification by the authorities. The liability for errors can be significant: from financial penalties to criminal liability and loss of reputation among business partners. We do realize that said verification is not always an easy task – which is why it is worth taking advantage of proven market solutions and the assistance of external advisors today.

In our opinion, one of the key elements of an effective sanctions compliance system is the verification of third parties to assess potential application of sanctions to their organizations, related entities, or country of origin – i.e., conducting so-called sanctions screening. Verification should start now – sanctions regimes are being enforced more strictly, and business partners and stakeholders increasingly expect evidence of due diligence. The lack of appropriate tools or processes may result in the need to suspend business operations with a given counterparty or expose the organization to high financial penalties, or even criminal liability.

However, we recognize that this process is complex, and that sanctions-related risks may arise in many day-to-day business transactions. In our daily practice, we see that even mature organizations face numerous challenges in implementing effective sanctions compliance solutions. This is why it is important to rely on proven market-standard technology solutions and expert support.

How does sanctions screening work in practice and what should organizations consider?

• The purpose of screening is to determine whether specific entities, individuals, countries or goods are included on sanctions lists or have links to sanctioned parties;
• Sanctions screening involves reviewing numerous sources, including sanctions lists maintained by different countries, authorities and international organizations, as well as processing large volumes of data. This may be particularly challenging when dealing with counterparties from multiple jurisdiction, where verification often requires the use of different databases, languages and data formats;
• Highly complex screenings processes can be time-consuming and, if performed manually, may increase the risk of human error;
• Organizations should establish a reliable screening methodology, appropriately tailored to the nature and scope if their business activities, as well as to the types of clients and counterparties they engage with;
• Properly tailored screening should also include regular updates of entity data and monitoring of relevant changes, including changes on ownership structure or identification data, which may affect the assessment of sanctions risk.

The good news is that modern technology solutions can significantly streamline third-party verification, enhance the effectiveness of sanctions screening and help organizations mitigate potential liability risks.

Our practice shows that effective sanctions screening is particularly important for GBS entities working with numerous counterparties across multiple markets. Robust verification helps reduce risk by standardizing third-party due diligence processes, strengthening supply chain resilience and enabling organizations to respond quickly to an evolving regulatory environment.

How can technology be used to conduct screening?

• Automated screening can be performed using data from up-to-date sanctions lists and supported by dedicated screening tools;
• Technology tools allow screening criteria to be configured in line with an organization’s specific sanctions obligations, risk profile and scope of business activities;
• The collected data is presented in a clear, structured final report tailored to the organization’s specific needs.

Based on our many years of experience, the use of modern technology solutions in sanctions screening can deliver significant business benefits, including:

• Fewer false alerts – a properly designed screening system can significantly reduce the risk of false positives and other screening errors;
• Faster decision-making – automated data processing enables quicker generations of screening results, supporting faster and more informed business decisions;
•  Broader risk coverage – advanced screening tools can identify risk-relevant links and relationships, regardless of their complexity, jurisdictions or language;
• Greater consistency and efficiency – applying standardized verifications methods across all screened entities helps ensure consistent decision making, comprehensive verification and smoother day-to-day operations.

As the geopolitical landscape continues to evolve and sanctions become an increasingly common foreign policy tool, reliance on advanced technologies will become more widespread and, in many cases, indispensable.

Our professional experience shows that companies leveraging new technologies and automations in sanctions screening and verifications processes can not only better protect their operations against regulatory breaches but also gain a significant competitive advantage through greater efficiency and increased trust among stakeholders. The future of sanctions compliance is undoubtedly digital, intelligent and integrated, which is why organizations should already be taking steps to implement the most effective sanctions compliance framework for their business.

Authors:

Kamil Kozłowski

Co-head of Defence & Dual Use
Head of Compliance & Regulatory Disputes
Counsel, Adwokat, PwC Legal
Tel: +48 519 507 755
Email: kamil.kozlowski@pwc.com

Judyta Banaszyńska

Compliance Practice
Senior Associate, Adwokat, Approved Compliance Officer
PwC Legal
Tel: +48 571 779 652
Email: judyta.banaszynska@pwc.com