What is sanctions evasion?
The sanctions evasion definition is the circumvention of measures – imposed by regulators – to engage in prohibited activities. In the context of AML, anti money laundering sanctions evasion refers to attempts to circumvent sanction measures imposed by regulatory authorities on specific individuals, institutions, or countries/territories. The various types of sanctions deter activities deemed illegal or violate accepted norms.
Sanctions evasion techniques
AML sanction evasion techniques can include a variety of activities. These include:
- Shifting assets – to hard-to-trace bank accounts or directly to trusted entities to hide the source of the owner, selling or transferring assets at a loss to use them before sanctions take effect,
- Shifting the business area – changing the business area to one that is not sanctioned,
- Data manipulation – falsifying financial data to conceal the nature of a transaction,
- Virtual transactions – the use of cryptocurrencies that make transactions anonymous.
Red flags in AML – the rationale behind attempts to avoid sanctions
AML warning signals are characteristic actions that may indicate a suspicious transaction. These include:
- Avoidance of contact by new customers – companies should have “Know Your Customer” (KYC in crypto) and customer due diligence (Customer Due Diligence) procedures when implementing new customers,
- Unusual transactions – attention should be drawn to cash payments using multiple accounts or foreign accounts, questionable source of funds – another warning sign is conducting transactions using funds (cash deposits or cryptocurrency assets) whose sources are difficult to identify,
- Characteristics of the transaction – some characteristics of the transaction, such as its size, nature, or frequency, should also be questionable.
Avoiding AML sanctions is an illegal activity that seriously violates existing regulatory provisions. It is incumbent on financial institutions to take precautions to prevent such practices and facilitate the identification of suspicious transactions. Reporting transactions potentially related to money laundering to sanctions enforcement authorities is also necessary.
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