Unlocking potential: Enhancing sanctions compliance with AI

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Financial institutions have faced several key challenges when it comes to sanctions compliance.

These challenges stem from the complexity and ever-changing nature of sanctions regimes, as well as the need to balance compliance with operational efficiency. Furthermore, sanctions carry strict liability, meaning that financial institutions (including individual employees) can be held accountable for violations, regardless of intent or negligence. We identify five key global challenges:

• constantly changing sanctions lists and regulations
• conflicting demands from multiple jurisdictions
• reputational risks and steep penalties for non-compliance
• operational strain from manual screening and fragmented data
• indirect exposure to sanctioned entities through third-party relationships

The sanctions landscape is evolving rapidly, making staying compliant an increasingly difficult demand. Artificial Intelligence (AI) can play a crucial role in enhancing your ability to stay in control of your compliance obligations. AI must be viewed as a comprehensive methodology for conducting work, not just a tooling consideration.

An effective AI-driven sanctions strategy is founded on specific organizational goals, which when achieved tackle the challenges faced by the organization, and in addition create optimization once these challenges are addressed. Goal setting must always begin with a comprehensive and well-considered data strategy.

Creating a centralized sanctions knowledge base that consolidates information from diverse sources, such as web scraping, documents, and databases, is essential. Once the data is organized, it enhances operational capabilities, allowing the focus to shift toward effectively leveraging this power.

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Real-world impact: AI in action at global banks

EY works with major international banks to build AI-powered sanctions frameworks that go beyond compliance. These solutions include:

• real-time screening of OFAC and other global lists
• detection of sanctioned individuals in customer data
• risk scoring based on transaction behavior and network analysis
• secondary screening to reduce false positives• GenAI-powered interpretation of complex regulatory texts

These are not plug-and-play tools. EY tailors each solution to the client’s systems, risk profile and operational needs. EY teams utilize various forms of AI to achieve client goals. Agentic AI has proven to be invaluable, facilitating communication with knowledge bases and simplifying complex legal terminology. AI has also been used in conducting mapping internal policies, risks and controls to current and future regulations, helping organizations stay safe and secure in the present, while being proactive and prepared for the future.

On an operational level, monitoring transactions for potential sanctions violations is critical. This involves analyzing transaction behaviors and utilizing AI to identify patterns that distinguish potentially suspicious activities from legitimate ones.

Data under pressure

The efficacy of sanctions compliance is fundamentally predicated on the integrity and accessibility of pertinent data, yet this domain is fraught with substantial technological challenges: The inherent complexity of navigating the intricate landscape of sanctions regulations, propagated by diverse jurisdictions, presents a formidable operational burden. To effectively mitigate sanctions risks, institutions must establish robust risk management frameworks and remain acutely aware of indirect sanctions risks. The imperative to manage these operational and compliance burdens demands a strategic and meticulous approach, ensuring that all facets of sanctions compliance are addressed with precision and diligence.

The regulatory gauntlet

Financial institutions are now navigating a landscape of heightened regulatory scrutiny, where sanctions compliance is no longer a peripheral concern but a central pillar of operational integrity. Adapting to the shifting expectations of sanctions compliance is mandatory:

• Regulators are intensifying their focus, demonstrating a willingness to impose substantial financial penalties for even minor infractions, underscoring the gravity of non-compliance.
• The regulatory expectations surrounding sanctions are in a state of perpetual evolution, demanding that institutions maintain a proactive stance to anticipate and adapt to emerging standards.

This dynamic environment necessitates a continuous cycle of learning and adaptation, ensuring that compliance practices remain aligned with the latest regulatory announcements. The complexity is further compounded by the potential for conflicting regulatory requirements across multiple jurisdictions, presenting financial institutions with intricate compliance dilemmas. These conflicting mandates necessitate a nuanced understanding of each regulatory framework and the ability to reconcile potentially disparate obligations, requiring a strategic and adaptable approach to maintain compliance across diverse operational landscapes.

The financial world is a complex ecosystem, constantly grappling with evolving regulations and geopolitical shifts. Among the most pressing challenges faced by financial institutions is navigating the intricate and dynamic landscape of international sanctions. From fluctuating lists to conflicting jurisdictional rules, the pressure to maintain robust compliance is immense. But amidst these challenges, a beacon of hope emerges: Artificial Intelligence (AI) and, more specifically, Generative AI (GenAI).

AI and GenAI are not merely tools; they are strategic assets that empower financial institutions to move from reactive to proactive compliance. By automating repetitive tasks, enhancing data analysis, and providing real-time insights, these technologies can significantly reduce risk and improve efficiency.

The journey towards robust sanctions compliance is an ongoing process. By embracing the transformative power of AI and GenAI, financial institutions can navigate the shifting sands of global regulations with greater confidence and agility, ensuring a safer and more secure financial future.

Want to dive deeper into how EY helps financial institutions strengthen their sanctions frameworks with AI and shape the future with confidence?

Download our comprehensive PDF report, featuring real-world use cases, global perspectives from EY teams in the US, Baltics, Asia and the Netherlands, and a blueprint for building a future-ready compliance strategy.

Get practical insights, proven methodologies and a clear roadmap to make your organization sanctions-proof. Or contact EY to explore how we can tailor AI-driven compliance solutions to your needs.