The 4 Pillars of Effective Sanctions Compliance Programs

Digital assets like cryptocurrencies have opened new avenues for innovation, efficiency, and inclusivity in the financial system. But with this new technology comes new risks. 

For crypto exchanges, fintechs, and financial institutions, in particular, staying compliant with sanctions enforcement is a top priority. Beyond protecting organizations from reputational damage and monetary penalties, having a strong sanctions compliance program is essential for upholding the integrity of the financial system and mitigating illicit activity like money laundering and terrorist financing.

With more transactions taking place on blockchains — and more global authorities putting increased sanctions controls and penalties in place — it has never been more important for crypto businesses, fintechs, and financial institutions to invest in blockchain intelligence to inform their sanctions programs.

In this post, we’ll explore four of the most critical capabilities to consider when choosing a blockchain intelligence solution to help drive your sanctions compliance program. 

1. International list coverage

Digital assets are often subject to multi-jurisdictional regulations. Crypto exchanges, fintechs, and financial institutions often serve customers around the world and facilitate transnational payments — and some Virtual Asset Service Providers (VASPs) even incorporate around the world.

With each border digital currencies cross, a new set of sanctions obligations is potentially unlocked. That’s why it’s critical to choose a blockchain intelligence solution that covers multiple national sanctions lists and which conducts post-designation investigations. This enables you to gain international awareness and uncover the full scope of a sanctioned actor’s on-chain footprint.

{{fyicard-sanctions-landingpage-1}}

2. Comprehensive attribution

The most effective sanctions compliance programs leverage blockchain intelligence that provides comprehensive attribution for entities / individuals that appear on national sanctions lists, and entities and individuals in jurisdictions that are comprehensively sanctioned by Office of Foreign Assets Control (OFAC) — like North Korea and Iran. This gives you a more complete operating picture and allows you to make more informed decisions about the level of risk your organization is willing to take on.

It’s also important to stay aware of and adapt to evolving tactics used by sanctioned entities to obfuscate their activities. TRM takes a multidisciplinary approach to attribution, combining technology, domain expertise, and legal acumen to ensure that sanctioned networks and entities — as well as those operating in comprehensively sanctioned jurisdictions — are uncovered in our platform and appropriately flagged.

{{blogad-sanctionsenforcementcompliance-whitepaper-1}}

3. Speed of attribution

Compliance teams need to be able to adapt quickly to the ever-evolving landscape of crypto-related sanctions designations — as any gap in time between a designation and transactional activity by a sanctioned entity could result in significant penalties. 

That’s why it’s critical to use blockchain intelligence with the most current sanctions designations possible. TRM pulls new sanctions designations into the platform mere hours after new designations are published — and we are continuously working to accelerate this process. TRM’s real-time monitoring of major sanctions lists and designations also allows for swift attribution updates in our platform, so crypto businesses, fintechs, and financial institutions can rapidly identify and mitigate their exposure to sanctioned entities.

4. Dynamic alerts for facilitation and blocking

Because customer types and risk appetites can vary broadly between organizations, a one-size-fits-all approach to sanctions compliance isn’t ideal. The most effective programs take this into account when determining the sanctions lists, regimes, and regulatory frameworks they care about most, and adjust their controls accordingly.

TRM’s platform can easily be adjusted to meet the needs of specific types of customers — with highly customizable alert rules that enable you to configure exactly which types of transactions you want to flag and define rules based on a counterparty’s country.

{{horizontal-line}}

TRM Labs provides the most expansive sanctions coverage and capabilities for identifying, assessing, and mitigating risks in real-time — empowering crypto exchanges, fintechs, and financial institutions to successfully navigate the complex and evolving landscape of global sanctions.

To learn more about how TRM improves compliance in the modern sanctions enforcement era, check out this white paper.