Financial sanctions

Financial institutions must check whether sanctions have been imposed on their customers. If so, they must carry out the sanction.

Financial institutions and sanctions

Sanctions are often imposed by the United Nations (UN) or the European Union (EU). For example, if there is a threat to international peace and security. Sanctions are imposed on individuals, organisations and countries. Their aim is to prevent or make it more difficult to engage in undesirable behaviour. Institutions providing financial services must carry out the financial sanctions. If a customer is on a sanctions list they must take action. A few examples:

• A bank must freeze an organisation’s bank balance so that no money can be withdrawn from the account.
• A pension fund may not invest in a firm.
• An insurer is not allowed to provide insurance to an individual.

Checking customers for sanctions

Financial institutions must check whether sanctions have been imposed on their customers. They do so by means of sanction lists: lists of all persons and organisations against which sanctions are in force. Institutions must perform these checks on a regular basis, not just when an individual or organisation wants to become a customer. They must also check their existing customers on a regular basis. This can be difficult, especially for a firm that has several shareholders. This means it takes a great deal of time and effort to identify customers on sanctions lists. For this, institutions must know their customers and check whether they have been placed on a sanctions list.

Carrying out sanctions and reporting to DNB

If investigations by a bank, trust office or other financial institution reveal that a customer is on a sanctions list or has recently been added, or if a customer wants to transfer money or invest in a party that is on the sanctions list, Then a bank, trust office or other financial institution must carry out the sanction immediately. The Sanctions Act requires them to do so. This means it may not provide financial services, such as granting a loan. In addition, financial institutions must report to us if a customer is on a sanctions list or if a transaction with a party on a sanctions list is due to take place. We send an overview of these reports to the Ministry of Finance.  

Our supervision

It is important for banks and other financial institutions to investigate their customers properly. They must also monitor their customers' transactions to avoid transferring money to or investing money in a party that is on a sanctions list. We keep a watchful eye on their customer investigations and transaction monitoring. This reduces the risk of non-compliance regulations in the financial sector.