Latvian central bank offers sanctions advice

Latvijas Banka, the Latvian central bank (LB) said May 2 it has developed new "Guidelines for establishing and maintaining effective sanctions screening system" to support financial market participants in sanctions screening.

"The Guidelines encompass the conclusions derived from the thematic inspection conducted by Latvijas Banka, along with examples illustrating good and undesirable practices. During the inspection, Latvijas Banka assessed the utilisation of 45 IT systems for sanctions screening across 22 financial market participants," said LB in a release.

"Latvijas Banka has concluded that the majority of IT systems used by financial institutions for sanctions screening are generally effective and beneficial. Nonetheless, shortcomings were identified in all inspected institutions, prompting financial market participants – banks and non-bank financial institutions – to rectify them," it noted.


During inspections, the main gaps identified were things like inadequate configuration of software and systems, lack of updates and insufficient involvement of anti-money laundering and the prevention of terrorism and proliferation financing risk management teams in the development, testing and maintenance of these systems.

"The Guidelines serve as a practical manual designed to equip financial market participants with valuable information on how to ensure effective management of sanctions risk," LB said.




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In the examples cited in the Guidelines (which are also attached to this news story) several potential blindspots are identified, such as banks paying close attention to EU and U.S. sanctions and euro and dollar payments but not giving as much attention to smaller countries such as the United Kingdom and payments in pounds sterling.

"The institution might be exposed to a risk that the institution could be involved in violation or circumvention of sanctions imposed by the United Kingdom, which, among other, can cause legal and reputation risks," say the Guidelines.

Banks and financial institutions should also have the ability to apply "fuzzy matching algorithms" to identify small variations in spelling or informational similarities that could point to sanctions evasion, LB said.

The "Guidelines for establishing and maintaining effective sanctions screening system" are available in PDF format in the attachment to this story and online here:

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