In an increasingly regulated financial services environment, compliance with international sanction regimes is non-negotiable. One of the most important requirements for Financial Services Providers (FSPs), Key Individuals (KIs), and Representatives is to conduct Sanction Checks as part of day-to-day business operations.
Sanction lists are published of all individuals, entities, and organisations associated with terrorism, human rights violations, money laundering, and other unlawful activities. FSPs are prohibited from establishing or maintaining business relationships with such parties. Sanction checks therefore form a critical control to ensure that an FSP is not inadvertently facilitating financial crime or breaching international obligations.
For Financial Services Providers, sanction checks are not optional – they are a legal obligation. Under the Financial Intelligence Centre Act (FICA), FSPs are required to apply strict Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) controls, with sanction screening forming an explicit part of the Risk Management and Compliance Programme (RMCP). Failure to conduct these checks can result in heavy penalties, administrative sanctions, and reputational damage that could jeopardise the licence of the business.
Beyond compliance, sanction screening is an important risk management tool. By conducting checks at onboarding and throughout the client lifecycle, FSPs reduce exposure to legal, financial, and operational risks, and avoid the possibility of transactions being blocked, frozen, or reversed due to links with sanctioned parties.
For Key Individuals, sanction checks also serve as evidence of proper governance and oversight, as required under the FAIS Act and the fit and proper requirements. They demonstrate that controls are in place and actively monitored. In turn, this strengthens the reputation of the FSP in the eyes of regulators, product suppliers, and clients, showing that the business operates with integrity and in line with international best practice.
To be effective, sanction checks must be fully embedded into the RMCP and daily business processes. This includes screening all new clients during onboarding, applying ongoing monitoring as sanction lists are updated, maintaining accurate records of all screening, and regularly testing and reviewing the process to ensure it remains effective
Sanction checks apply to all clients and all financial services, regardless of the product provided or the specific service rendered. This means there are no exemptions – whether the FSP is onboarding a client for a long-term insurance product, an investment, a retirement annuity, or providing intermediary services, sanction screening must be completed.
The RMCP must clearly specify when and how often sanction checks, as part of ongoing due diligence, are conducted. Practically, this means checks must take place at onboarding (before any business is concluded) and throughout the client’s lifecycle. "Throughout the lifecycle" should be understood as continuous or event-driven screening – for example, when a client’s details are updated, when transactions or withdrawals are processed, or when new products are added. In addition, ongoing monitoring must be built into the FSP’s systems to capture changes in sanction lists, ensuring clients are re-screened against updated lists on a regular basis
In short, the RMCP should spell out that sanction checks are:
- compulsory at onboarding,
- repeated whenever material changes occur in the client relationship, and
- performed on a continuous basis through automated or manual monitoring against
updated sanction lists
For FSPs, KIs, and Representatives, sanction checks are more than a compliance requirement – they are a frontline defence against financial crime, reputational risk, and regulatory sanction. By embedding these checks into the RMCP, FSPs not only meet legal obligations but also protect the business, its clients, and the broader financial system.
To ensure compliance, FSPs should use proper, workable, and credible methods to conduct sanction screening. Should the FSP not have a formal tool or system in place to conduct these checks, consider a platform such as Dilisense, which allows the FSP to do screening without cost. Incorporating screening tools into the RMCP demonstrates not only compliance, but also a commitment to robust, practical, and sustainable risk management.
Written by Wayne Naude
Compliance Officer (under supervision)
ComplyEeze
