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Expect less efficient sanctions-alert management during COVID-19, keep regulators apprised –legal experts

Brett Wolf  Regulatory Intelligence

Brett Wolf  Regulatory Intelligence

As bank and non-bank corporate entities work to manage their sanctions compliance programs virtually during the COVID-19 pandemic, they must expect less efficient workflow and keep regulators apprised of their challenges, legal experts said during a webcast on Thursday.

Perhaps the most heavily impacted sanctions compliance practitioners are alert managers who probe screening alerts, determining whether possible matches are in fact sanctioned parties, they said.

Sanctions alert management is “one of the more difficult things to manage virtually” because “it really is an area that is not that accessible to do while at home,” said Nicole Succar, counsel with Crowell & Moring in New York. She said that reality should “inform the decision-making process” for those overseeing the work and perhaps elicit “compassion.”

“This is very much the first time that these alert reviewers – which I like to call our front-line fighters – have worked from home. A lot of them who are getting laptops maybe never even had a laptop and they’re very much used to the collaborative team, in-office environment to do this work,” said Succar, a former U.S. Treasury Department sanctions officer.

The key to success is “communication on all fronts,” she said.

“It’s important that you communicate to that staff that is working at home… that you understand that this will inevitably affect efficiency, the alerts (processed) per hour,” she said.

The goal should be to avoid sanctions violations “that will inevitably occur if quality is compromised,” Succar said

“Many might be feeling the pressure to rush through alerts because they are finding that at home they are having personal difficulties as well as work difficulties adjusting and doing the same amount they did in the office, so I think it’s really important to set the tone that the quality still matters more than the quantity,” she said.

The message must also be delivered to senior managers who need to understand that “alert rates” the team committed to prior to the pandemic will be negatively affected.

“For proper governance, you might think about resetting those targets, a lot of us are making adjustments for COVID-19 and maybe your alert expectations need adjustment too, and proper governance will help you show internally and externally that you have taken this pandemic into account,” she said.

If senior management pushes back against the idea of clearing fewer alerts per hour, they should be told that the other options are “to look at external staffing options” such as law firms or consultants or to redeploy internal sanctions or other compliance professionals.

She added that it also is wise to keep enforcement agencies and regulators in the loop.

“In that communication, include what steps you may have been taking (with regard to) your alert management process, they decisions made and why, and how this still protects your program,” she said. “Also communicate what you’re doing to get back to your previous normal in this new normal, especially if this is going to be awhile in jurisdictions like New York and California and London.

“And ask for extensions now, not when you miss deadlines, or are about to miss them.”

While many regulatory exams are “paused,” that “doesn’t necessarily mean that those organizations don’t want to hear from you” or that they will not probe firms’ when they resume examinations, she said.

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), which administers sanctions and issues penalties for non-compliance, is “very much still in business” despite the COVID-19 pandemic, said Dj Wolff, a partner with Crowell & Moring in Washington.

“We are getting follow-up requests on pending enforcement actions and have seen several licenses issued over the past couple of days,” he said.

Firms must be prepared in case they have a sanctions violation during the pandemic and need to bring it to the attention OFAC or a prudential regulator, Succar said.

“Are you tracking your information correctly to be able to reflect that the root cause has to do with some of the sudden changes that you had to make during this time? Or will that regulator if they don’t have the right data will they attribute (the violation) to something that was already weak in your program that has nothing to do with the pandemic? You want in those conversations to be able to make that distinction,” she said. “We’re not trying to use the pandemic to get out of trouble – I think folks will see right through that – but if you have strong data that shows that that might have been part of the issue it’s good (to document).”

Regulators are “facing the same difficulties and burdens that all of us are in trying to convert to a tele-work status,” Caroline Brown, a partner with Crowell & Moring, said. She called for firms to be patient as they await responses from officials.

“They’re still making sure that the work gets done,” said Brown, a former attorney advisor with the U.S. Treasury Department. “To my knowledge, all of the agencies that are relevant to this discussion are under maximum telework policies.”

(For a regularly updated list of U.S. federal regulations related to the COVID-19/novel coronavirus update, please click on this link to the Skopos Labs Cornoavirus Policy Tracker.)

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