Dutch Central Bank Reviews Sanction Screening Effectiveness At Payment Firms

August 2, 2022
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De Nederlandsche Bank (DNB) has confirmed that it will investigate the effectiveness of sanctions screening systems this autumn, while the Latvian Financial Intelligence Unit releases new research on key indicators of a sanctions evader.

De Nederlandsche Bank (DNB) has confirmed that it will investigate the effectiveness of sanctions screening systems this autumn, while the Latvian Financial Intelligence Unit releases new research on key indicators of a sanctions evader.

“We will conduct a study in the autumn of 2022 at a selection of banks and payment institutions to test the effectiveness of the existing sanction screening tools,” said the DNB in its announcement detailing its investigation.

This will revolve around the testing of transaction screening and the screening of the names and details of relations.

The DNB said it will use tools supplied by a third-party provider to support its investigation, which it claims have already been used by various institutions and foreign regulators.

For banks and payment institutions taking part, the DNB said the firms will receive a separate invitation within a few weeks, which will contain an explanation of the study and the next steps.

The study will start in mid-September. Following the completion of the investigation, feedback will be provided to the banks and payment institutions involved and any generic conclusions will be shared between them.

For now, it is uncertain how much of this will make it into the public domain.

The DNB’s intervention comes at the same time as a new document issued by the Financial Intelligence Unit of Latvia (FIU Latvia) detailing the results of its assessment of the key indicators of Russian sanctions evasion.

It was compiled through a public-private partnership supported by relevant authorities in the country and commercial banks, including Luminor, SEB and Swedbank.

Included in this assessment is a section dedicated to payments. The FIU Latvia claims that since sanctions have been implemented in the Baltic state, there has been an increase in payments to or from Russia's neighbouring countries or jurisdictions that do not impose sanctions against Russia.

These jurisdictions include: Kazakhstan; Uzbekistan; Serbia; Turkey; African countries; and Kyrgyzstan.

“Following the imposition of the sanctions against Russia, customers are encouraged to settle payments for goods and services provided by the sanctioned entity to accounts in other countries,” the report says, outlining the current situation.

Financial clients are also being encouraged to settle payments using less traceable or monitorable payment methods, such as virtual assets.

The research pointed out that financial flows to family members of sanctioned persons have increased without economic or legal rationale. For example, Russia-based relatives of sanctioned entities' employees have been receiving the person’s salary directly from the Russian branch of the sanctioned entity, before transferring the salary to their relative’s account in Latvia.

Payments and banking compliance teams have been advised to watch out for abrupt changes in a business model, and the opening of bank accounts in countries that opted not to follow the West’s sanction regime.

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