Authors: Nikolaos Panagiotopoulos, Vangelis Manouvelos

Title: Economic Sanctions, Embargoes and Counter Financing of Terrorism: Evaluation of the evolving Legal Framework and the Customers – Transactions Algorithmic Matching Methods in the Banking System

Abstract

Economic sanctions and embargoes are one of the hottest topics in recent years, due to the power struggle in the evolving international relations. Many international organizations and alliances are trying to impose their will to other jurisdictions through economic and transactional restrictions. In this fluid environment, Banks, and especially financial institutions that maintain international presence, are requested to cope with multiple international restrictions (that may even contradict to each other) and with numerous obligations to scan transactions and clientele against endless lists of sanctioned individuals and entities.

Our objective is to analyze the impact of applying the sanctions and embargoes lists on the everyday operations of the financial institutions and especially to assess the level of requirements, the operational risk that derives from these controls, the effectiveness of the controls, and the inherent non-compliance risk that may lurk. We conduct an analysis on the problem of name matching against the designated sanction list through specialized software, the methods and algorithms in use and any alternative methods that financial institutions incorporate.

The current subject has been deemed as extremely crucial and of high risk for the international banking system as historically the largest fines of all time have been imposed on banking institutions that have violated international economic sanctions and embargoes.

The application of sanctions is also of particular technical interest as it provides opportunities for the application of new highly specialized technologies and software, making it necessary to engage people with specialized knowledge in protecting the banking system.