A suspected transaction involving a sanctioned individual represents a significant and immediate compliance risk. The analyst's primary duty is to adhere to the financial institution's established internal policies and escalation procedures. Reporting the issue immediately ensures that it is handled by the appropriate personnel, such as the compliance officer or a dedicated sanctions team, for proper investigation, potential asset freezing, and reporting to relevant authorities. This action mitigates the risk of sanctions violations, which can result in severe legal and financial penalties for the institution. Any deviation from this protocol, such as delaying the report or contacting the customer, would be a serious breach of compliance obligations.

A. Continuing with standard due diligence fails to address the critical, high-priority risk that a potential sanctions match presents, which requires an immediate and separate escalation path.

B. A potential sanctions match is a high-priority, not a low-priority, issue due to the severe legal and regulatory consequences of non-compliance.

C. Contacting the customer about a sanctions concern could alert them to an investigation, an act known as "tipping off," which is illegal in many jurisdictions.

1. FATF (2012-2023)

International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation - The FATF Recommendations

FATF

Paris

France. The Interpretive Note to Recommendation 6 ("Targeted financial sanctions related to terrorism and terrorist financing") mandates that financial institutions must report actions taken

such as freezing assets

to competent authorities "without delay." This establishes the principle of immediate action and reporting.

2. The Wolfsberg Group

Guidance on Sanctions Screening

(2019). Section 3.1

"Alert Handling

" outlines that financial institutions should have a "defined process" for investigating potential sanctions matches

which includes escalation of alerts to a "designated point of contact (e.g. the Compliance department)" for review and decision-making. This supports the answer of following defined procedures immediately.

3. U.S. Department of the Treasury

Office of Foreign Assets Control (OFAC)

A Framework for OFAC Compliance Commitments

(May 2

2019). In its discussion of the "Internal Controls" element of a compliance program

the framework emphasizes the need for procedures to "identify

interdict

escalate

[and] report" potential sanctions issues. This underscores the regulatory expectation that an analyst will follow a defined escalation and reporting procedure.