On Wednesday, June 1, the New York ACAMS Chapter and The Center for Professional Accounting Practices at Fordham University hosted an event at Fordham University School of Law titled Russia Sanctions and KYC/EDD Challenges. The event was sponsored by Thomson Reuters & Thomson Reuters Special Services, LLC, and pictured from left to right is Ingo Steinhaeuser (Thomson Reuters), moderator Howard Spieler, ACAMS Chapter Co-Chair and the following panelists: Peter Piatetsky (CEO, Castellum.AI), Katya Hazard, Associate Managing Director (K2 Integrity); and Salvatore Scotto, Head of Sanctions, Bank of China.
The event opened with a discussion on how this is the first time in history that we are seeing such vast and coordinated sanctions. To put this into perspective – Russia has quickly become the most sanctioned country in the world. Within 10 days, Russia received more sanctions than Iran had received in 10 years. The sanctions against Russia today are also distinct because financial institutions were able to prepare in advance. Proactive actions that were taken included assessing the direct and indirect risk exposure to Russia. The use of data analytics has been invaluable to financial institutions in order to understand customer and transactional exposure to Russia.
To manage the current financial crime risks, panelists recommended considering EU countries with weaker regulations and controls to be at higher risk. Jurisdictions with high degrees of secrecy are also likely taken advantage of by Russian oligarchs. In many cases, the most effective way to identify ties to Russia is through the first line of defense relationships. The responsibility can also be put onto customers to prove whether certain large or flagged transactions aren’t connected with Russia sanctions evasions. Additionally, screening systems can include identifiers like addresses and phone numbers within filters that have been identified in connection with Russia sanctioned entities.
Overall, we have learned that we have to be proactive in assessing risk exposure and that data quality (from a watchlist and internal client perspective) is critical in order to effectively manage compliance risks.
Key takeaways included that: these sanctions will be with us for a while; and financial institutions should discuss compliance practices with their foreign correspondent banks clients so that they understand any indirect risk exposure.