Sanction Screening

Sanction Screening is a tool in financial regulation to restrict a business relationship with someone or a company flagged for breaking a serious financial law. As more cryptocurrency regulation mounts, crypto firms are taking sanction screening to new highs.

Cryptocurrency exchanges work like banks, and there is a need to verify users to ensure that they pass the KYC and AML(Know Your Customer and Anti-Money Laundering Law) verifications.

Crypto exchanges carry out sanction screening against agency lists from the likes of the FBI and OFAC covering areas such as the Dark Web, fraud and ransomware to ascertain if potential users have been flagged by the sanction list of countries, institutions, and international organizations.

An individual marked by countries or international bodies will not be allowed to operate on crypto exchanges. However, as a result of the nature of decentralized exchanges, such a user may open an account as the KYC and AML regulations are absent in DEX.

The purpose of sanction screening is to prevent money laundering and potential terrorism-sponsoring. The pressure regulatory bodies have placed on CEXes has resulted in them going the extra mile to carry out sanction screening through specialized solutions that provide robust services with data from many countries, including PEP data (Politically Exposed Persons).