As an employer, conducting sanctions and watchlist checks is a critical part of hiring responsibly.These checks serve as a tool to monitor and confirm that candidates are not involved in activities that violate international law or ethical standards, including terrorism, money laundering, drug trafficking, or serious human rights violations.
By screening candidates early, employers can reduce legal, financial and reputational risks, while building a more secure and compliant organisation.
In this guide, we’ll cover:
- What a sanction check is and how it differs from a watchlist check
- Why these checks matter in regulated industries
- Key compliance regulations (UK and global)
- Real-world case studies
- How automation can support sanctions compliance in hiring
What are sanctions and how do they differ from watchlist checks?
What is a sanctions check? A sanctions check determines whether an individual or organisation appears on a national or international sanctions list. Sanctions are typically imposed by governments or bodies like the UN or EU and may involve trade bans, travel restrictions or asset freezes.
By contrast, watchlist checks look for individuals linked to suspicious or criminal activity, even if they haven’t been formally sanctioned. These lists are compiled by regulatory, law enforcement, and intelligence bodies globally.
To conduct sanctions and watchlist screenings, your company compares candidates' names and relevant details to databases containing information about sanctions and watchlists. These databases are usually managed by organisations such as the UN, EU, US Office of Foreign Assets Control (OFAC), and other national or international bodies.
It's important to remember these checks aren’t one-time events. Sanctions and watchlists are updated frequently, so regular monitoring is essential to maintain compliance.
Who needs to perform sanctions and watchlist checks
These checks are crucial for organisations in high-risk or regulated sectors, where failure to screen candidates properly can lead to serious consequences. While they are necessary across various industries and job roles, they are particularly crucial in the following areas:
- Banking and finance: Banks, credit card companies, and other financial institutions are required by law in many countries to perform these checks to prevent money laundering and terrorist financing.
- Export/import businesses: Companies that export or import goods, mainly to or from countries under sanctions, must ensure their staff are not inadvertently violating them.
- Travel and hospitality: Airlines, travel agencies, and hotels often perform these checks to avoid facilitating travel for individuals under sanctions or on watchlists.
- Technology: Tech companies that provide software or services internationally must ensure that sanctioned individuals are not using their products.
- Non-profit organisations: International NGOs must perform these checks to ensure their funds are not diverted to sanctioned individuals.
Sanctions and watchlist checks in a regulatory context
Sanctions and watchlist checks aren’t just a best practice - they’re a legal requirement. These checks are woven into regulatory frameworks that employers need to be aware of. Below, we will be taking a look at some of the key regulations and why they matter for maintaining compliance.
BS7858
BS7858 is a British Standard that outlines the best practice for security screening of individuals working in roles that involve the safety of people, goods, or property. This could include positions like security guards, CCTV operators, and others within the security industry.
As part of the BS7858 screening process, individuals must be checked against sanctions and watchlists. This ensures that no one banned from working in security-sensitive environments is inadvertently hired due to past involvement in illegal activity.
This check is part of a broader screening process, including verifying the individual's identity, employment history, criminal record, and financial background..
Fourth Anti-Money Laundering Directive (European Union)
This EU directive requires all member states to implement laws mandating that financial institutions perform sanctions and watchlist checks. It forms a key part of the EU’s efforts to combat money laundering and terrorism financing.
Proceeds of Crime Act (United Kingdom)
This UK legislation requires businesses to report any dealings with individuals or entities on sanctions lists. Companies must perform sanctions and watchlist checks to ensure they are not unknowingly engaging in prohibiting activities.
USA Patriot Act (United States)
Introduced after the 9/11 attacks, the PATRIOT Act compels financial institutions in the U.S. to develop and maintain Anti-Money Laundering (AML) programs. As part of these programs, organisations must check their candidates against various sanctions and watchlists to ensure they are not facilitating money laundering or terrorist financing.
Find out more about background checks in the United States.
Anti-Money Laundering and Counter-Terrorism Financing Act (Australia)
The Anti-Money Laundering and Counter-Terrorism Financing Act requires Australian businesses to implement robust AML procedures, including mandatory sanctions and watchlist screening as part of due diligence.
Find out more about background checks in Australia.
Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Hong Kong)
Hong Kong’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance requires businesses to conduct thorough due diligence on customers, including checking names against watchlists and sanctions lists before establishing any business relationships.
Find out more about background checks in Hong Kong.
Requirements for UK Employers
As an employer in the United Kingdom, it is crucial to prioritise legal compliance and maintain a positive public image and strong reputation. A key part of this is having a thorough and compliant hiring process, including conducting sanction checks on all potential employees.
The Office of Financial Sanctions Implementation (OFSI) provides a comprehensive list of individuals and entities subject to financial sanctions in the country. By cross-referencing candidates against this list , you can identify any potential red flags that may indicate involvement in criminal activity or associations with sanctioned parties.
It’s also important to keep a record of all checks and ensure your HR and hiring teams are trained to recognise signs of concern. Failing to meet these obligations can lead to legal penalties, fines, and reputational damage.
In fact, employing someone who appears on a sanctions list is considered a criminal offence in the UK. It is illegal to provide financial services - including employment - to a sanctioned individual. Breaches can result in significant fines or up to 7 years in prison.
Building sanctions checks into your hiring process is not just about compliance - it’s a proactive way to protect your organisation from both legal and reputational risk.
Case study: Tracerco’s breach of financial sanctions
The UK Office of Financial Sanctions Implementation (OFSI) imposed a £15,000 penalty on Tracerco Limited- a UK company providing measuring products and services to the oil and gas industry - for breaching financial sanctions. Tracerco was found to have made funds available for the benefit of a designated person in breach of economic sanctions on Syria.
This case highlights that even well-established businesses and large corporations can be caught out by inadequate compliance processes.
Due diligence through automation
Zinc helps businesses streamline candidate verification with access to over 1,200 sanctions and watchlists. Attempting to manually check against such a vast number of lists is overwhelming and nearly impossible, leading to errors and oversights that jeopardise compliance. These lists undergo frequent updates and expansion, making it an arduous task to stay up-to-date.
Zinc's automated system offers more than just quick and precise pre-screening. It delivers a structured, reliable process for handling tasks at scale. This helps organisations stay compliant and operate confidently within international employment laws.
Find out more about how we can help with global sanctions and watchlist checks, or book a demo to speak with our team today.
FAQs
1. What is a sanction check?
A sanction check is the process of screening individuals or organisations against official lists of those restricted from certain activities due to legal or ethical violations, such as terrorism or financial crimes.
2. How often should sanction and watchlist checks be conducted?
These tests should be performed during hiring and repeated regularly, as lists are frequently updated and ongoing monitoring is essential for compliance.
3. What information is needed to run a sanction or watchlist check?
Typically, basic personal details such as full name, date of birth, and nationality are required to run accurate checks. In some cases, additional identifiers like passport numbers or addresses may be needed to confirm a match and avoid false positives.
