12 Aug 2025
Why Do Companies Need to Do Sanctions Checks?
Sanctions checks are essential for businesses to avoid legal, financial, and reputational risks. Learn why they matter, the risks of non-compliance, and best practices for implementation.
Sanctions checks are no longer optional — they are a legal requirement and a business necessity for any organization engaged in cross-border trade, financial services, or high-risk industries.
They protect companies from legal penalties, reputational harm, and the risk of facilitating financial crime.
According to the World Bank, over $2 trillion is laundered globally every year, and sanctions screening is a core tool in combating this flow of illicit funds.
1. Legal Compliance: Avoiding Heavy Penalties
Governments and international organizations — such as the United Nations, European Union, and the U.S. Office of Foreign Assets Control (OFAC) — maintain sanctions lists that companies must not engage with.
Non-compliance can result in:
- Multi-million-dollar fines
- Loss of business licenses
- Criminal prosecution for executives
Case Study: In 2019, Standard Chartered Bank paid over $1.1 billion to U.S. and UK regulators for violating sanctions on Iran, Myanmar, Sudan, and Syria.
Sanctions lists are updated frequently — sometimes daily — making ongoing screening just as important as initial onboarding checks.
2. Protecting Brand Reputation
A single sanctions breach can cause lasting damage to public trust.
In today’s interconnected world, violations quickly make headlines and trend on social media.
Reputational damage impacts:
- Customer trust and loyalty
- Ability to secure investment
- Employee morale and retention
Even if the breach is unintentional, the PR crisis can take years (and millions in brand rehabilitation) to fix.
3. Preventing Financial Crime
Sanctions screening is part of a broader anti-money laundering (AML) and counter-terrorism financing (CTF) strategy.
It helps prevent:
- Money laundering
- Terrorist financing
- Arms proliferation
- Trade with embargoed regions
For example, screening against the Financial Action Task Force (FATF) recommendations can help businesses avoid facilitating transactions linked to organized crime or extremist groups.
4. Meeting Stakeholder and Investor Expectations
Institutional investors, banking partners, and regulators expect robust compliance programs as a condition of doing business.
A strong sanctions compliance framework can:
- Improve due diligence ratings
- Make fundraising easier
- Reduce audit friction
5. Staying Competitive in a Global Market
Many companies see sanctions screening as a competitive advantage.
Businesses with a reputation for strong compliance can win contracts with multinational clients who require strict KYC/AML measures from their partners.
6. How Sanctions Checks Fit into a Compliance Program
Sanctions checks work best when combined with:
- PEP screening (politically exposed persons)
- Adverse media monitoring
- Beneficial ownership verification
- Ongoing transaction monitoring
Summary Table
| Reason for Sanctions Checks | Why It Matters | Real-World Impact |
|---|---|---|
| Legal compliance | Avoid fines and prosecution | $1.1B fine for Standard Chartered (2019) |
| Brand protection | Maintain trust & credibility | Avoid negative media cycles |
| Crime prevention | Block illicit funds & terrorism financing | Compliance with FATF guidance |
| Investor confidence | Secure funding & partnerships | Meet due diligence requirements |
| Market competitiveness | Win contracts & tenders | Preferred partner for multinationals |
Final Thoughts
Sanctions checks are not just a legal tick-box — they are a strategic investment in the long-term safety, stability, and reputation of your business.
In an era where financial crime is borderless, and regulatory scrutiny is increasing, failing to perform sanctions checks is not just risky — it’s a threat to your company’s survival.
For practical implementation guides, see our related article: Understanding the Different Types of Sanctions Checks.
Related reading
When to Use Which Sanctions Checks
Not all sanctions checks serve the same purpose. This guide helps compliance teams decide the right type of screening for onboarding, ongoing monitoring, and special investigations.
Key Global Sanctions Lists SMEs Should Be Screening Against
Learn which sanctions lists matter most for small and medium-sized enterprises, and how to choose the right ones based on your business operations and risk profile.
