A sanctions risk assessment as a prerequisite for an effective sanctions compliance program: Five recommendations to improve its effectiveness

For many years, the Dutch Financial Industry’s risk assessments related to financial economic crime (FEC) are dominated by scenarios involving money laundering (ML) and terrorism financing (FT) risks. In general, less attention has been paid to the various sanctions related risks Dutch financial institutions are exposed to. Russia's war of aggression against Ukraine and the illegal annexation of Ukraine's Donetsk, Luhansk, Zaporizhzhia and Kherson regions has significantly changed this. However, a recent publication of De Nederlandsche Bank (DNB) concerning the ‘results of DNB’s examinations on compliance with sanctions regulations’ showed that the current sanctions risk assessments of financial institutions (FI’s) do often not have the right level of maturity to be effectively used by management as a steering document.
This contribution examines the purpose and legal basis of sanctions risk assessments and provides recommendations in order to improve their effectiveness. The...

Verder in dit artikel:

1. The role of the sanctions risk assessment within the FI’s sanctions compliance program

1.1. Introduction

1.2. Risk-based sanctions compliance program

1.3. The current state of the sanctions risk assessment

2. The sanctions risk assessment in a Dutch regulatory context

2.1. Background

2.2. The sanctions risk assessment, a “nice to have” or a “need to have”?

3. Modernizing the Dutch sanctions regime: any impact on sanctions risk assessment requirements?

3.1. Modernization of the Dutch sanctions regime[27]

3.2. The new draft legislative proposal

4. How to mature the sanctions risk assessment? Five key recommendations

4.1. Sanctions risk assessment as a steering document

4.2. Targeted ad-hoc sanctions risk analysis in case of major events

4.3. Prioritizing sanctions risks: focus on top risks

4.4. Data-driven sanctions risk assessment

4.5. Sanctions risk assessment on a (local) assessment unit level

5. Conclusion