Running a company successfully and safely requires having a clear view of both those who work for you and those with whom you do business. Especially in certain industries, such as finance or healthcare, it's essential to know that you have not made business connections with individuals who could pose a risk to you, your staff, and the company’s mission. Pre-employment criminal background checks help you to safeguard against potentially dangerous hires, and ongoing criminal monitoring provides a red flag warning if an employee's status changes.
As important as they are, these checks are only one piece of the puzzle, particularly for organizations dealing with high-level transactions, large amounts of money, or the care of others, such as in healthcare. Across many sectors, it's critical to be aware of potential sanctions against the professionals and organizations with which you do business. Checking sanctions lists can seem complex and daunting, but this essential type of due diligence protects your company, ensures compliance with government regulations, and makes it easier to avoid major headaches.
What is a sanction check, and what does it mean for your business?
What Are Sanctions?
There are several kinds of sanctions, and some of them function on a larger scale than others. Let's begin with the most basic type: sanctions issued by licensing boards and similar bodies for specific industries. Most commonly, such sanctions occur in the healthcare industry.
When an individual violates a code of conduct, behaves unprofessionally, or causes avoidable and unnecessary harm, the board that grants their license may issue a sanction. This sanction creates a permanent record of the event and records the disciplinary actions or punishments, such as license suspension, handed down by the board. Severe sanctions could mean prohibition from practicing in certain areas or businesses ever again—for example, federal healthcare sanctions bar participation in programs such as Medicare.
Other sanctions have a much larger scope, sometimes global. Governments create and maintain lists of individuals associated with specific nations or organizations that businesses must not transact or work with in any capacity. Major banks also partner with governments to maintain lists of individuals associated with potential criminal acts and organizations to prevent money laundering.
There are many types of sanctions that governments can apply for many reasons, from international geopolitical concerns to efforts to target known bad actors. Businesses must strive to avoid working not only with sanctioned individuals but also with organizations that may support or have direct connections to sanctioned parties.
Generally, companies doing business within a nation must comply with sanctions lists maintained by that nation’s government. For example, U.S.-based businesses in sectors such as banking and insurance must check sanctions lists maintained by the Office of Foreign Assets Control (OFAC) to avoid working with forbidden nations and organizations.
What Is a Sanction Check?
Given the critical role that sanctions play, regardless of their type, you need a reliable way to investigate these concerns on behalf of your business. That's where sanction checks come into play. They resemble a background check, but instead of searching state and local criminal history databases as a regular background check would, they search specific databases filled with sanction information.
With a sanction check, there's no need for a business to assign an employee on payroll to manually enter names into sanction checking tools. Not only is such a manual process more time consuming and error prone, but it also may not yield the most up-to-date results. Using a sanction check is a simpler way for a business to meet its obligations in this area without becoming bogged down in the details.
Which Industries Need to Check Sanction Lists?
When is it a company's responsibility to investigate sanction information? The answer depends on the type of sanctions, but many businesses may use a sanction screening services in their due diligence procedures. First, let's consider non-international sanctions lists, such as those built for specific industries.
All or most operators in the healthcare space should strongly consider running a specific sanction check to see if any applicants or potential employees have committed fraud or malpractice or otherwise received punitive measures from a licensing board. Not only is protecting a high standard of patient care a strong reason to run such a check, but such checks are also essential for preventing fraud—consider that many hospitals have a persistent issue with drug theft by employees, for example.
The organizations that would benefit most from a healthcare sanctions check include:
- Hospitals, clinics, and other major healthcare organizations
- Private practice offices
- Home care providers
- Assisted living facilities
- Memory care facilities
What about other kinds of businesses, such as those that must undertake "know your customer" activities and other anti-money laundering efforts? Organizations that consult databases such as the lists maintained by OFAC may not be in the business of providing healthcare, but their services are nonetheless vital.
Some of the companies that should use these checks:
- Financial services providers, such as lenders, investment firms, banks, credit unions, and brokers
- Insurance agencies of all types
- Law firms
- Any business planning to operate internationally or transact with international customers and companies
- Companies serving as contractors to the government
Businesses and the professionals in charge of regulatory compliance should speak with the appropriate legal professionals for the clearest understanding of their requirements under federal law.
The Most Common Sanction Lists to Know
Which databases and resources should your business explore to guard against exposure to sanctioned individuals? Third-party services that streamline this process can automatically check many resources on your behalf. For healthcare organizations, some of those lists may include the following:
- OIG General Exclusion list maintained by the Department of Health and Human Services Inspector General for sanctions and exclusions related to federal healthcare programs
- Debarment list from the Food & Drug Administration
- State-based healthcare exclusion registries
For organizations in other sectors that must be wary of international sanctions, money laundering, and other similar concerns, sanction check services will often include a look at any potential matches found in databases such as the:
- Office of the Controller of the Currency Enforcement Actions
- Office of Foreign Assets Control (OFAC) Specially Designated Nationals List
- Interpol Fugitive List and FBI Most Wanted
- General Services Administration Excluded Parties List
What Does a Sanction Screening Report Look Like?
A sanction check report will resemble a regular background check. It will display the information that you provided about the individual followed by any records that match some or all of that information. The data returned on matches will vary based on the type of database—for example, a healthcare exclusion record might list the reason for punitive action, the date that the action occurred, and the punishment.
A government record hit will also include information that you can use to verify the hit. The more information that you can provide at the initial stage of the process, the easier it is to vet a record for authenticity. These reports are typically easy to read.
What Should You Do If You Receive a Match?
A match from a sanction database does not automatically mean that the individual in question is the sanctioned person. Consider OFAC for just one example: this massive government database contains many names that are similar enough that they may appear on a sanction check for an individual. Businesses must have a procedure in place to vet potential matches.
Carefully compare the information in the report against the information provided to you by a client, applicant, or other individual. Ensure that all elements of the record match. The Department of the Treasury publishes a comprehensive guide for evaluating OFAC matches for legitimacy.
If you follow these procedures and determine that you have a valid match—or a reasonable belief that it could be a valid match—you should contact the appropriate government agency for further instructions. The U.S. Treasury maintains a hotline for OFAC matches, and other agencies have similar phone numbers available for reporting sanction matches and receiving guidance on your next steps.
For healthcare matches, there's usually no need to notify anyone, but you should take the same steps to carefully vet the record and ensure that you have a solid match before making any decisions.
Why Is It So Important to Monitor These Concerns?
Protecting your business and the individuals that it serves is the essential purpose of sanction checks. For healthcare providers, these procedures aid in maintaining a high standard of care while protecting the vulnerable from individuals who have already demonstrated poor judgment or malicious behavior. Overlooking information about sanctions and hiring a risky individual could expose the organization to legal threats and accusations of negligence if a new offense occurs.
For high-risk organizations, avoiding work with sanctioned individuals and associated parties is more than a matter of compliance and safety. There are severe financial penalties for violating sanctions, especially if an individual appears on the OFAC list. Fines can easily number in the tens of thousands of dollars with the potential to reach into the millions for severe or repeated violations. As a result, OFAC often encourages businesses to adopt a "when in doubt" approach by contacting the office for guidance when faced with any risk of illegal transactions.
How Can Businesses Effectively Manage Sanctions Checks?
In light of the potential ramifications for failing to use proper procedures, sanctions checks aren't optional in many sectors—they're essential. How can your organization ensure that it is taking the right approach to these critical procedures? Here are a few quick tips to consider:
- Develop a robust screening method backed by tools that can provide the information you need in a timely manner.
- Understand the current state of sanctions that may affect the way you do business and stay up-to-date on changes to the law. Knowing where your business stands regarding regulation is a critical element of compliance.
- Institute oversight into the screening process and ensure that there are procedures in place to minimize the time it takes to investigate and validate potential matches.
- Submit sanctions report requests with accurate information to ensure the highest chance of clean matches and fewer mismatches from official databases.
Using Good Governance, Best Practices, and Powerful Tools for Safety
What is a sanction check but one more way for your business to invest in protecting itself? Comply with sanctions and ensure that you've carried out the due diligence to safeguard against doing business with restricted entities, and your business will unlock both essential safeguards and peace of mind. With tools such as the National Security OneSEARCH from backgroundchecks.com, searching OFAC registries and industry-specific sanctions lists is simple.
From ensuring that a healthcare provider remains in good standing with licensing bodies to avoiding doing business with restricted individuals, groups, and nations, sanction checks are an essential element of oversight for many companies. Consider the impact that these regulations may have on your business and consult with your preferred legal counsel for the clearest view of your responsibilities in this area.
While some businesses may never need to conduct such a check, others must make them a consistent and well-managed element of their operations. Know the guidelines for your business and tap into the right tools for the job today.
About Michael Klazema The author
Michael Klazema is the lead author and editor for Dallas-based backgroundchecks.com with a focus on human resource and employment screening developments