Banks are advised to take into account the inclusion of their clients in sanction lists

Banks are recommended to consider the inclusion of their clients in foreign states' and intergovernmental organizations' sanction lists when implementing risk management measures. This recommendation was provided by the National Bank of Ukraine (NBU) in a letter dated June 2, 2023, as reported by the regulator's press service.

Considering the extensive sanctions imposed on Russia, Belarus, and Iran, in response to the threat to Ukraine's independence, state sovereignty, and territorial integrity, financial institutions are advised to apply additional cautionary measures to manage sanction-related risks imposed by partner countries.

The National Bank emphasized that alongside the reputational risks for banks associated with servicing sanctioned clients, there is also a risk of fund blocking related to conducting operations for such clients through correspondent accounts opened in foreign banks.

The NBU recommends that banks regulate the following issues regarding financial monitoring in their internal documents:

1. Including a risk criterion associated with foreign states and intergovernmental organizations' sanctions in the risk criteria list based on client types.
2. Determining the list of foreign states and intergovernmental organizations whose sanction restrictions should be considered when assessing client risks.
3. Establishing an approach to establishing and maintaining business relationships with sanctioned clients, taking into account the bank's or group's risk appetite.

These measures aim to enhance the effectiveness of risk management related to the legalization of proceeds from criminal activities, financing of terrorism, and proliferation of weapons of mass destruction.