Asset management firms are under increasing scrutiny to uphold strict sanctions compliance, as failure to do so could lead to severe financial penalties and reputational damage. A growing emphasis is being placed on screening investors—particularly high-net-worth individuals—not only during onboarding but throughout the entire client relationship.
According to Moody’s, any direct or indirect connection to sanctioned entities or jurisdictions exposes firms to significant risks. When potential links are identified, swift action—such as blocking or freezing assets—is critical to avoid regulatory backlash. Non-bank financial institutions, including asset managers, are not exempt from these obligations and may face enforcement action depending on the jurisdiction.
To mitigate risks, experts stress the need for a robust, always-on compliance framework. Regular screening of both clients and beneficial owners helps capture changes in status or new sanctions designations. Continuous monitoring also demonstrates strong governance and reinforces investor trust.
Best practices include adopting a risk-based approach and implementing automated screening tools for major sanctions lists from the UK, EU, US, and UN. Firms should also assess ownership and control structures, as entities majority-owned by sanctioned parties are often treated as sanctioned under rules such as those of OFAC.
Technology plays a pivotal role in this process. Solutions that integrate sanctions data with beneficial ownership records, corporate link analysis, and adverse media monitoring can reveal hidden risks. Additionally, firms should ensure rapid escalation procedures, regular staff training, and periodic audits to stay aligned with evolving regulatory expectations.
As global sanctions regimes expand amid geopolitical tensions, compliance is no longer a back-office task but a core business priority. Asset managers adopting proactive, technology-driven strategies will be better positioned to safeguard their operations and reputation in this high-risk environment.
