In September 2001, the government issued an executive order (EO 13224) that requires anyone conducting a financial transaction to determine whether the debtor is listed on the Designated Nationals and Blocked Persons List. A good Watch List Search screens several databases to ensure compliance with federal law. The federal government has 11 databases it uses to search for those targeted by the Office of Foreign Assets Control (OFAC).
When you should search the Watch List
When banks and lenders search the watch list, they can help prevent the financial system from being used for crimes like terrorism financing, money laundering, and supporting international criminal organizations. Additionally, engaging with individuals or entities on the OFAC list could lead to significant legal and reputational risks.
Conducting a comprehensive watch list search can mitigate these risks and protect you from legal action, fines, and damage to your reputation.
Financial institutions are required to follow Know Your Customer (KYC) requirements, including verifying their customers' identities. A watch list search is part of the customer due diligence (CDD) process and ensures you do not do business with those who are sanctioned, especially when dealing with international clients.
The Office of Foreign Assets Control (OFAC) / Patriot Act
The OFAC publishes lists of those owned or controlled by targeted countries and those acting on their behalf. The list includes individuals, entities, and groups, including narcotics traffickers and terrorists who may not be country-specific.
Various watch list databases include:
United Nations (UN) Watch List
Chapter VII of the United Nations Charter allows the United Nations Security Council (UNSC) to maintain and / or restore international peace and security. Currently, 14 ongoing sanctions regimes focus on supporting the political settlement of conflicts, counterterrorism, and nuclear non-proliferation. Article 41 of the Charter dictates which enforcement options that do not use armed forces are available. A watch list search includes this database of 14 sanctions committees.
European Union Watch List
Often, the European Union (EU) intervenes to prevent conflict. It may also intervene in times of crisis. In some cases, the EU can intervene with financial sanctions, including the freezing of assets. The watch list search includes this database of sanctioned individuals, organizations and companies.
Office of Superintendent of Financial Institutions
This office maintains a watch list of individuals or entities associated with terrorism. The Office of Superintendent of Financial Institutions (OSFI) uses the Anti-Terrorism Act of the Canadian government to create a list of individuals and entities who are or may be involved in terrorism.
The Consolidated Canadian Autonomous Sanctions List
Another database in the watch list search includes the Consolidated Canadian Autonomous Sanctions List, which lists individuals and entities subject to sanctions under the Special Economic Measures Act (SEMA) and the Justice for Victims of Corrupt Foreign Officials Act (JVCFOA).
United Kingdom (UK) Watch List
The United Kingdom's Terrorist Asset-Freezing Act was enacted in 2010. It allows the HM Treasury to freeze the economic resources, including funds, of any individual, entity, or organization that it suspects of being involved in terrorist activities. The Act also allows for enforcing Council Regulation No 2580/2001. This database is also included in the watch list.
Denied Persons List
Section 764.3(a)(2) of the Export Administration Regulations and (EAR) identifies foreign individuals and entities that do not have export privileges. It is prohibited to conduct business with anyone listed in this database.
Entity List
This list identifies foreign parties that cannot receive some or all items subject to the EAR unless the exporter has a license. In many cases, those on the Entity List have a higher risk of diverting to weapons of mass destruction programs, terrorism, and other activities that violate national security and / or foreign policy interests. The Entity List, also included in the watch list search, helps prevent unauthorized trade in any items specified in the EAR.
Unverified List
A party on the Unverified List cannot receive a license for an exception to the Entity List. This includes exports, reexports, and in-country transfers.
Excluded Parties List System
The System for Award Management (SAM) allows you to screen individuals, entities, and organizations against active exclusion records for those excluded from receiving some federal contracts, benefits, or assistance. Screening for SAM exclusions is imperative for companies that hold federal contracts. They should screen subcontractors and other companies associated with federal assistance or benefits programs.
Limited Denials of Participation (LDP)
A U.S. Department of Housing and Urban Development (HUD) field office and the Deputy Assistant Secretary for Single Family or Multifamily Housing can exclude someone from participating in a HUD program area. Searching this database lets you know that a contractor applying for funds to work in a HUD program area has the authority to work in such areas.
Terrorist Exclusion List (TEL)
The Secretary of State, as authorized by Section 411 of the USA Patriot Act of 2001 (8 U.S.C §1182) and the Attorney General, can dictate which organizations are terrorist organizations for immigration purposes. Those organizations are listed on the Terrorist Exclusion List, which is included in the watch list search.
The Watch List Search: A crucial tool for lenders
When you need to screen individuals, entities, and organizations against databases for criminal or suspicious activities, the Watch List Search provides a search of the above 11 databases. This comprehensive search helps enhance security measures and ensures you, as a lender, comply with regulatory standards.
Using a Watch List Search also mitigates risks associated with illicit activities, including fraud and terrorism. A Watch List Search uses advanced algorithms to match names against the various databases included in this search with high accuracy. It also helps keep banking and financial institutions federally compliant with anti-money laundering and counterterrorism financing regulations.
Contact Wolters Kluwer for more information about our Watch List Search or to set up an account for this or other searches that can help protect your financial interests.
