Latvijas Banka has developed the "Guidelines for establishing and maintaining effective sanctions screening system" to support financial market participants in creating efficient and outcome-oriented information technology (IT) systems tailored for sanctions screening. The Guidelines encompass the conclusions derived from the thematic inspection conducted by Latvijas Banka, along with examples illustrating good and undesirable practices. During the inspection, Latvijas Banka assessed the utilisation of 45 IT systems for sanctions screening across 22 financial market participants.
Latvijas Banka has concluded that the majority of IT systems used by financial institutions for sanctions screening are generally effective and beneficial. Nonetheless, shortcomings were identified in all inspected institutions, prompting financial market participants – banks and non-bank financial institutions – to rectify them.
During the thematic inspection, the predominant reasons contributing to the ineffective implementation of sanctions screening systems were identified, for example, inadequate configuration, the lack of updates and insufficient involvement of anti-money laundering and the prevention of terrorism and proliferation financing risk management teams in the development, testing and maintenance of these systems.
The Guidelines serve as a practical manual designed to equip financial market participants with valuable information on how to ensure effective management of sanctions risk.
Within its Guidelines, Latvijas Banka provides information on anticipated outcomes to empower financial market participants in meeting the requirements of laws and regulations concerning sanctions risk management, for instance, on conducting a routine risk assessment, documenting the outcomes of the sanctions screening system configuration and testing, as well as implementing the measures customised to the institution's specific risks.
Guidelines for establishing and maintaining effective sanctions screening system