Article 10: How to get Sanctions Compliant, Part 1: Who are you dealing with?

Always keep in mind the four ‘Keys to Compliance’: Who, What, Where, and Why

In this new series of articles, we will be exploring how small and medium-sized enterprises (SMEs) can apply these principles in practice. This first article focuses on perhaps the most fundamental question in sanctions compliance: Who are you dealing with? 

How can SMEs check Who is involved in a transaction?

There is no one-size-fits-all approach to due diligence. Organisations, counterparties, and transactions all differ, so the level and nature of due diligence can also differ accordingly. However, all research shares some key points. For any business, a fundamental part of sanctions due diligence is understanding who you are dealing with. This means checking your customer, supplier, agent, distributor, or any person or company involved in the transaction. 

Even without expensive tools, SMEs can still conduct effective checks by using public information and a simple, structured approach. 

1. Check names carefully, including variations and different spellings

Sanctioned individuals and businesses often appear under different spellings, names, or different translations of their names. This is common when names come from Russian, Arabic, or Asian languages. Sanctions due diligence requires collecting information, checking it, and asking questions when something is unclear. 

To reduce risk:  

• Ask the counterparty for official documents showing their full legal name.
• Try different spellings when searching (for example Sergey, Sergei, Serhiy).
• Remove special characters or accents when searching. 

While larger companies and banks will use “fuzzy matching” technology to catch variations in names, SMEs are not required to use advanced tools, but the principle is useful: always check more than one spelling.  

2. Use official sanctions lists and public sources

If you are not using an external supplier for sanctions screening, you can use official lists published by the European Commission and Member States. For example: 

• The ‘Consolidated list of persons, groups and entities subject to EU financial sanctions’, listing all those subject to asset freezes under EU sanctions.
• The EU Sanctions Map, to understand which sanctions apply to which country or sector.
• Lists shared by national competent authorities in EU Member States.

3. Look beyond the customer: Review ownership and control

A company may not be listed itself, but it may be owned or controlled by someone who is sanctioned. This still creates significant sanctions risk, as we explain in our article about ownership and control.  

Analysing who owns or controls a company gives insights into whether a sanctioned person is involved in the company and, if so, what this means for sanctions risk. 

The Helpdesk also helps SMEs to look for “red flags,” such as complex structures, sudden ownership changes, and newly formed companies, which suggest higher sanctions risk. 

4. Screen the entire transaction chain

Many businesses know that a customer and its owners or controllers should be checked against sanctions lists. But what about other parties in the transaction or the supply chain? 

Businesses should also apply the screening methods set out in this article to: 

• Suppliers
• Agents
• Distributors
• Brokers
• Banks used for payments 

Involving any of these in the transaction may breach sanctions as well. 

5. Managing false positives: How to avoid wrong matches

It is common to encounter names that appear similar to those on sanctions lists. These are known as “false positives.” To confirm whether a match is genuine: 

• Compare date of birth, address, nationality, or company registration information.
• Check whether the match on the EU list works in the same sector or country.
• Ask the counterparty to provide proof of identity or ownership if needed.  

If something still feels wrong or unclear, do not proceed until the doubt is resolved. Remember: 

• Collect information
• Verify information
• Ask questions to resolve any remaining concerns  

A note for financial institutions

Financial institutions are subject to enhanced screening obligations. The European Banking Authority has produced guidelines applicable to banks, payment institutions, and crypto-asset service providers. 

Such institutions should refer directly to these guidelines to ensure compliance with the higher standards expected in the financial sector. 

In sum: What should SMEs remember when screening counterparties?

By using official EU sources, checking name variations, screening owners and intermediaries, and carefully reviewing any possible matches, SMEs can carry out effective checks on who they are dealing with without expensive software. A simple approach – collect, verify, ask questions – is enough to manage sanctions risks and stay compliant with EU rules. And, if you are still concerned, you can also access free compliance support from the EU Sanctions Helpdesk. 

Get sanctions support

European SMEs may not always have the time or resources to conduct full counterparty screening independently. To support them, the EU has established the EU Sanctions Helpdesk, a free service to help EU SMEs comply with EU Sanctions. 

The Helpdesk can: 

• Answer your questions on the applicability of EU sanctions
• Offer you guidance on performing sanctions due diligence
• Undertake sanctions due diligence for you, free of charge, if you encounter red flags or you simply need the support  

If you have a question on a transaction, find out how to get support here.

Author

The EU Sanctions Helpdesk Team