How to Do Sanctions Checks in Procurement

Procurement teams are no longer just sourcing goods and services—they’re navigating a complex web of international laws and regulations. One of the biggest challenges is ensuring that the companies and individuals you work with are not on any sanctions lists. These sanctions are legal restrictions imposed by governments or international bodies to block trade or financial dealings with certain countries, companies, or people due to reasons such as terrorism, human rights abuses, or geopolitical conflicts.

Missing these checks isn’t just a paperwork issue—it can lead to devastating consequences like massive fines, legal troubles, or even losing your license to operate internationally. So, what exactly are sanctions checks in procurement? How do you do them properly? Let’s take a deep dive into the process and make it crystal clear.

What Are Sanctions Checks, and Why Do They Matter So Much?

Imagine sanctions checks as a security gate in your procurement process. Just like you wouldn’t want unknown or suspicious visitors wandering freely in your office, you don’t want to unknowingly buy from or pay a supplier who’s blacklisted by government authorities.

Sanctions lists are maintained by agencies such as the U.S. Treasury’s Office of Foreign Assets Control (OFAC), the United Nations, the European Union, and others. These lists include names of companies, individuals, and sometimes entire countries that face trade restrictions. For example, OFAC screening involves checking against the Specially Designated Nationals (SDN) list, which identifies individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries.

To give you a sense of why this matters, consider this: In 2023, OFAC processed over 14,000 license requests related to sanctions compliance and issued more than $1.2 billion in civil penalties for violations. That’s a massive enforcement effort showing how seriously regulators take this. Meanwhile, the Bureau of Industry and Security (BIS), which controls exports of sensitive goods and technology, has imposed fines exceeding $150 million in recent years for illegal exports involving sanctioned parties. These figures underline that sanctions compliance is not optional—it’s critical.

Ignoring sanctions can bring legal penalties, freeze your company’s assets, and tarnish your reputation globally. So, procurement teams must get this right from the start.

Step 1: Embed Sanctions Checks in Your Supplier Onboarding Process

The first step to effective sanctions compliance is to weave it into your supplier onboarding. Don’t wait until after a contract is signed or a purchase order is issued to do these checks. Instead, build them into your initial vetting procedures.

Start by collecting comprehensive details about potential suppliers:

• Full company name and any trade names

• Registration or business license numbers

• Ownership structure and beneficial owners

• Names of directors, executives, and key personnel

This is important because global watchlists may target not only companies but also individuals linked to those companies. For example, if a supplier’s CEO is on a denied party list, the company itself might be restricted.

Once you have this data, run it through sanctions screening tools. Today, many companies use automated software solutions that cross-check their supplier data against multiple international sanctions lists in real-time. This is much faster and more reliable than manual searches.

If the system flags a potential match, don’t ignore it or assume it’s an error. Treat it as a red flag that needs further investigation. Early detection here saves huge headaches later on.

Step 2: Verify and Investigate Potential Matches Thoroughly

Sanctions lists are long and sometimes include people or companies with similar names. This means your screening might generate false positives. But false alarms don’t mean you should dismiss potential matches outright.

When you get a hit, dive deeper:

• Compare addresses, registration numbers, and other identifiers carefully

• Check if the flagged entity truly matches your supplier or just shares a similar name

• Review ownership details and cross-check executives or beneficial owners

If, after thorough review, you’re confident it’s a false positive, you can move forward. But if there’s a strong match, escalate immediately to your legal or compliance team.

They will help decide if you must refuse the supplier or if some licenses or exemptions permit limited dealings. Sometimes, sanctioned parties can transact under strict conditions, but only with explicit government approval.

This verification step is crucial because jumping to conclusions either way can expose your company to unnecessary risk or missed business opportunities.

Step 3: Don’t Stop at Onboarding—Set Up Ongoing Monitoring

Here’s a critical fact: Sanctions lists are not static. Governments update them frequently, sometimes weekly, based on evolving geopolitical situations. That means suppliers who were compliant six months ago might become sanctioned today.

To protect your procurement process continuously, you need to:

• Schedule periodic re-screening of your existing suppliers—at least quarterly or biannually

• Use automated monitoring tools that provide instant alerts if a supplier is added to a sanctions list

This ongoing vigilance lets you catch issues early and manage risks proactively. Without it, your company might unwittingly engage with sanctioned parties and face penalties or supply disruptions.

Step 4: Keep Thorough Documentation and Train Your Team

Another cornerstone of sanctions compliance is documentation. Keep detailed records of:

• Every sanctions screening you conduct

• Investigations and due diligence steps for flagged matches

• Decisions made and actions taken

These records are critical if your company ever faces an audit or regulatory investigation. They show you followed due process and took compliance seriously.

Training is equally important. Make sure everyone involved in procurement, legal, and finance understands sanctions policies, the tools used for screening, and the risks of non-compliance. Regular training sessions build awareness, reduce errors, and create a culture of compliance throughout your organization.

Real-World Example: The Price of Skipping Sanctions Checks

Let’s make this real. A well-known multinational once unknowingly sourced components from a supplier tied to a sanctioned country. The company was slapped with multimillion-dollar fines and had to halt shipments immediately.

This caused severe supply chain disruptions, increased costs, and damaged trust with customers and regulators. The fallout affected their bottom line and brand reputation for years.

The company’s mistake? Inadequate sanctions screening and no ongoing monitoring. Had they embedded proper checks and stayed vigilant, they could have avoided this costly debacle.

How to Choose the Right Sanctions Screening Tools

To do sanctions checks effectively, relying on manual lists or spreadsheets is no longer feasible. The best approach is automated sanctions screening software that can:

• Aggregate and update multiple sanctions lists from around the world

• Perform real-time matching with fuzzy logic to catch name variations

• Provide audit trails and documentation

• Send instant alerts for flagged suppliers or changes in status

• Some leading platforms also integrate directly with your procurement or ERP systems, streamlining workflows and minimizing manual effort.

Why Using a Tool Like Trademo Sanctions Screener Matters

Considering that OFAC penalties exceeded $1.2 billion in 2023 and BIS fines are routinely in the millions, you can’t afford gaps in your sanctions screening process. Trademo helps close those gaps by combining the latest trade data with powerful compliance checks tailored for procurement professionals.

Whether you’re a multinational with thousands of suppliers or a mid-sized company expanding globally, Trademo’s platform scales to your needs and offers a transparent, audit-ready trail of compliance checks that satisfy regulatory requirements.

Conclusion

Sanctions compliance might sound complicated, but it’s simply about protecting your business from enormous risks. By embedding automated screening into your supplier onboarding, verifying any red flags thoroughly, continuously monitoring your supplier base, documenting everything meticulously, and investing in team training, you build a strong shield against sanctions violations.

The global trade environment keeps evolving, and sanctions lists change rapidly. Staying on top of this isn’t optional; it’s a must-have capability for any procurement team that wants to operate confidently and sustainably.

If you’re just getting started, look into specialized sanctions screening tools or consult compliance experts who can tailor processes to your company’s size and sector. Taking these steps early gives you peace of mind and lets your procurement run smoothly, free from costly compliance surprises.