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Sanctions Compliance, Are You Doing Enough?

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There have been an increasing number of major fines and investigations related to sanctions and anti-money laundering (AML) compliance over the past few months. With 2020 shaping up to be a big year for government and regulatory enforcement, ask yourself the question, are you doing enough?

The latest AML fines statistics from Duff & Phelps (August 2020) show that the first half of 2020 has seen a major uptick in fines, with the global value totaling $706 million, compared to 2019’s full-year-total of $444 million! Even e-commerce giants like Amazon have come under fire.

As always, it’s vital to ensure your AML, CFT and sanctions compliance programs are effective. If they’re not, you’re at risk of running into similar issues. Governmental bodies in the United States, EU, and even Pakistan are currently, or planning to, step up their sanctions enforcement and commitments to FATF guidelines.

What can you do to ensure your business stays on top of the latest compliance requirements?

In order to stop funds from being directed to or received from sanctioned jurisdictions, it is essential to know the true location of everyone involved in the transaction. That means using more robust location data for compliance than an easily-spoofed IP address.

According to Irfan Vaid, a financial crimes compliance consultant and former U.S. Treasury official, “regulators and enforcement agencies have increasingly encouraged financial institutions to adopt new technologies as part of a risk-based approach to sanctions screening… Geolocation technology can assist in identifying and mitigating the risk of potential exposure to sanctioned parties or jurisdictions.”

Some financial institutions have begun checking clients’ IP addresses against lists of VPNs and Tor exit points, blocking any matches, according to Jason Rhoades, a former official with the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). While, “it’s better than nothing… [it’s] certainly not foolproof,” says Rhoades. That’s because VPNs and DNS proxies not only make it easy and cheap to spoof one’s IP address and therefore location, as the Treasury’s Office of Foreign Assets Control (OFAC) has recognized, they are also dynamic and continually update themselves to avoid detection.

The role of geolocation technology in ensuring sanctions compliance

Accurate, authenticated and unaltered geolocation data has a critical role to play in building a reliable and true digital identity. Accessing geolocation data as part of the identity verification and authentication process strengthens financial institutions’ ability to create a more holistic view of client and patron behavior, which is essential to evaluating risk and potentially suspicious activity. If you can detect location fraud in real-time, you can stop criminal activity from happening.

Incorporating geolocation data as part of ongoing risk management and compliance for banks, digital asset platforms, payment processors and other regulated financial entities, enables them to get in front of potential sanctions violations, money laundering, fraud, or other types of financial crimes.

FATF guidance identifies location data as critical to digital identity

For the first time, the Financial Action Task Force (FATF) has specifically identified geolocation data as a necessary part of digital identity and know your customer (KYC) verification. The FATF Guidance clearly illustrates that no single authentication factor is considered sufficiently trustworthy in Know Your Customer (KYC) and Customer Due Diligence (CDD).

Similarly, in terms of accuracy and integrity, multi-layer authentication of geolocation data is critical. Therefore, multiple geolocation data points – including WiFi Triangulation, GPS and GSM, as well as unaltered or un-spoofed IP data – should be aggregated to ensure the highest levels of location accuracy as part of digital identity verification process.

At GeoGuard, we focus solely on geolocation-based security, fraud detection and the protection of digital content and assets. We provide a suite of geolocation-based solutions that are combined with human intelligence in order to provide accurate, authenticated and unaltered location data and to stop internet users from spoofing their location. Interested in learning more about our financial crime detection and prevention solutions?

Contact us at solutions@geoguard.com or check out our recent white paper, FATF Puts Digital Fraud on the Map – Understanding the Role of Advanced Geolocation Technology to Combat Cybercrime.