1010. Insights: Sanctions: how can fintechs keep up?

0:14Welcome back to Fintech Insider. I'm Kate Moody and today we're diving into a trend that's quietly reshaping global finance, sanctions. Here's a question people in the know are asking, are we actually seeing a slowdown in sanctions? And if that wasn't already on your radar, it should be. Today, we're going to unpack exactly why. According to LexisNexis Risk Solutions' latest sanctions pulse report, the first half of 2025 saw a 40 % drop in new sanctions designations, the steepest slowdown in three years after a nonstop flurry of updates since 2022. But here's the twist. Fewer new entries don't necessarily mean compliance got easier.

0:50Delistings, modifications and regional divergences are still keeping fintech compliance teams on their toes. And enforcement? It's still moving at full speed, with fines from the Office of Foreign Assets Control topping$238 million already this year. So, what does all of this really mean for fintechs? Should we be worried? Can compliance teams breathe a little? Or is this just a temporary lull before the next wave of regulatory pressure hits? And how can fintechs leverage automation, AI and real-time data to stay ahead in an increasingly complex landscape? In partnership with LexisNexis Risk Solutions, we're unpacking these questions with an expert panel to separate perception from reality and help fintechs navigate the risks and opportunities that come with a quieter sanctions cycle.

1:33So, let's dive in. Firstly, we have someone who is very familiar with LexisNexis Risk Solutions and the work that they do. It's a big welcome to Katarina Plenic, Head of Regulation and Policy, Economic Crime at LexisNexis Risk Solutions. Welcome to the show, Katarina. Can you tell us a bit more about your role and in particular, what exactly is a sanction maybe for listeners that haven't come across this topic before? Hello, everyone, and thanks for having me, Kate. It's great to be here today with you, James and Emil. I'm quite excited to talk about the topic. As you said, I'm Head of Regulation and Policy at LexisNexis Risk Solutions.

2:08In my role, I focus on understanding the evolving regulatory landscape around financial crime, and that goes for anything from sanctions to anti-money laundering to fraud prevention. And a big part of my work actually involves translating complex regulatory changes into actionable intelligence for our clients, which includes banks, fintechs, other financial institutions globally, really. So to answer your question about the sanctions and what they actually are, maybe just a little bit of intro to help start the conversation and introduce sanctions to the audience. Now, assuming everybody would understand them, they can be quite complex.

2:48We can tell that sanctions are essentially restrictive measures imposed by the governments or international bodies like United Nations to achieve specific foreign policy and security objectives. They're basically a tool for economic diplomacy. They sit somewhere between the diplomatic pressure and military intervention. And in practical terms, sanctions typically come in different forms, such as, for example, asset freeze, where you must freeze the funds and economic resources of designated individuals or entities. This means that if someone is on a sanction list and tries to open a bank account or or conduct a transaction through your institution, you must block it.

3:32Then another one would be trade restrictions, for example, which prohibit or restrict the import or export of certain goods to a specific country or involving certain parties. There is a travel ban, though those are less relevant for financial institutions, and sectorial sanctions, which target specific industries or sectors of an economy like energy or defense. For financial services, firms, sanctions compliance, in practical terms, would mean you would need to screen every customer transaction, business relationship against this list to ensure that you're not facilitating sanction activity. And this is an optional, by the way.

4:14Breaching sanctions can result in severe penalties, reputational damage, and even criminal prosecution. And what makes this particularly challenging right now is the sheer volume and complexity behind it. And we'll talk about this in more detail, I'm sure, because we're going to go through the report. But definitely good timing to dive into the topic. Awesome. Well, yeah, thank you so much. I mean, firstly, great intro to yourself and to the topic as well. So looking forward to pick your brains as we go through. So thank you. Joining Catalonia, we also have James Doddsworth, Senior Manager for Financial Crime at Thistle Initiatives.

4:48Welcome to the show, James. Again, I'm sure you're very familiar with this topic as well over at Thistle. So great to have you on the show. but would you mind telling our listeners a bit more about you and what you've been up to in this space recently, please? Yeah, hi, Kate. Thanks for inviting me back again. It's good to be here. So, yes, I'm James, senior manager at FISIL Initiatives. We're a regulatory compliance consultancy where I lead on sanctions and fraud work with fintechs, banks, and other financial services firms. It's definitely been an interesting period over the past few months in relation to sanctions.

5:16There's a number of firms out there seeing some regulatory scrutiny of their sanctions programmes. There's a lot happening there. We've also been performing some interesting independent testing of screening tools as well which is always an interesting exercise when one of the times get the results of someone coming in and actually looking at their screening programs. So yeah, really excited to be here, really interesting topic. Good to have a chat with everyone here. Fantastic. We thank you very much for joining us. And another fantastic addition to our lineup is Emil Dow, Principal Consultant, Head of sanctions at Fintrail.

5:51Big welcome to the show for you as well Emil. Please could you introduce yourself and your role at Fintrail for listeners please. Thanks very much it's great to be here. Yeah Fintrail is a financial crime compliance consultancy. We work with firms across the UK, Europe and beyond. I lead many of the sanctions projects that we do with our clients whether that's assurance and testing of the systems and controls they already have in place or helping firms navigate kind of the regulatory requirements and build out screening programs from scratch. Awesome. Well, yeah, as I'm sure listeners can tell, three awesome experts who can help us unpick this complex but very important topic.

6:28So let's dive in. Katarina, you very kindly kind of gave us an initial intro to sanctions as you introduced yourself. Could you maybe explain a bit more about why these are so important, impactful within financial services? Like why should people working in this space be really keeping an eye on this topic? Yeah, absolutely. I think it's a crucial topic really because it's got a significant impact on the market, on the financial institutions. Why sanctions matter so much for financial services because banks and fintechs are essentially the gatekeepers of the global financial system. If you like, if the sanction individual or entity can access financial services, they can move money, they can conduct fraud operation, evade justice or continue harmful activities.

7:17So governments rely heavily on financial institutions to enforce sanctions policy. And getting this wrong isn't just a compliance issue, it's a matter of national security and international stability. And to go to your questions about not only why it matters, but why are we seeing probably this slowdown if you look into the reports that we're going to talk about today, we're seeing a significant moderation in sanction activity and the numbers are quite stark, I would say. In the first half of 2025, we recorded 113 list updates across the four major regulators, the UN, EU, OFAC and OFCIE. That's 23 % decrease compared to 146 updates for the first half of 2024.

8:04And more notably, we saw a 1 ,397 net designation added in the first half of 2025. That's a 40 % drop from the 2 ,340 net additions we saw in the same period last year. So to put this into context, this is the steepest slowing down we've seen in three years since Russia's invasion of Ukraine in 2022. Sanctions lists have been growing and growing and it was in unprecedented pace. We've seen more than one update per business date at some point, the volumes were rentless, quite concerning for the companies that had to conduct the screening and conduct the due diligence behind this. But now for the first time since that period began, we are seeing the pace ease significantly.

8:53The data shows that this isn't just a minor fluctuation, It's a meaningful slowdown. But we can dive into the reasons, actually, and look into why is this so. We still see that Russia-related sanctions dominate. Russia accounted for 92 % of the EU additions and 106 % of OFAC additions in the first half of 2025. So, yes, that's over 100 % for OFAC because they have also sanctioned enablers in third countries supporting Russian invasion. We are also seeing some significant listings, like Syria. It's a perfect example. Following the regime change, we saw 518 delisting sanctions were substantially eased.

9:38This is quite unprecedented in scale. At the same time, we are seeing intensified targeting in specific areas. For instance, the focus on shadow fleet vessels. These are ships helping sanctioned countries evade restrictions. resulted in 629 vessel designations across different agencies. So when you ask if this is a short-term pause or a long-term trend, I think the honor sensor would be it's complicated and we'll probably dive into that in a little bit more detail. I'll let others comment as well. Yeah, absolutely. James, what was your take on these findings from the report? I think this is a really, really interesting report.

10:19I think when we think about sanctions designations, obviously in the past few years, all we can think about is the sheer numbers, as Katarina's alluded to, going back from the Russian-Ukrainian conflict and just the unprecedented numbers of designations that were placed over the past number of years. So maybe in some respects, a slowdown in that area was going to be coming at some point. And as Katarina's already pointed out as well, when we think about the change in government with Syria as well, that's an opportunity to remove designations there and hopefully open up that economy as well. So whilst the numbers are quite stark, I think it also reflects the current social, political environment, which, of course, could change at any minute, as we know.

11:06We're still seeing designations coming out in the past few weeks from the UK, EU and the US against Rosneft and other oil-producing Russian firms as well. So it's an ongoing balance, I think. it's a really interesting insight as to showing the slowdown maybe in the scale, but the importance doesn't go away. I think that's the main thing. The risk is still prevalent for everyone. Yeah. And Emil, from your perspective in compliance, how real do these numbers feel on the ground? Is this playing out in terms of the conversations you're having with people working in the industry? Yeah. I mean, just to add to what James and Catherine have already pointed out, kind of the move away from the unprecedented levels, I would also add to that and say that it's also within the context So the US administration that has largely not been targeting Russia in a meaningful way for most of this year until about last week when we saw some designations come out against Russia.

11:58I think that has also added to that drop in designations. generally is moving towards kind of maintenance packages so maintaining existing measures designating kind of evasion networks operating out of third countries or extending kind of partial bands to become full bands or kind of closing some of the loopholes that have been present in previous iterations of existing sanctions packages so I think it's more about maintenance which for me produces just as many challenges for the private sector because actually it's not just about screening against new additions to the list but actually thinking quite creatively around sanctions evasion typologies and that's kind of the space that we're moving into i think at the same time we have seen areas where sanctions have ramped up Iran is a great example of that.

12:59The US pressure on Iran has been ramping up steadily throughout the year under the second Trump administration. And just last month, we had the snapback of UN-Iran sanctions with the UK and the EU following with their own unilateral sanctions against lots of entities and individuals in Iran. So we have seen sanctions ramp up in other areas. And I think it's, I would not call it a kind of a persistent drop. It's just a sort of a trend of the times, I suppose. Yeah, no, that makes a ton of sense. I suppose, Katrin, I'd like to get your perspective just to build on M.O.'s point around how maintenance doesn't necessarily mean life is easy for fintechs in their space or financial services more broadly.

13:46Could you help listeners maybe understand, And what is it practically that organizations need to be doing at this time to kind of prepare? Yeah, absolutely. And I agree. Having less names to screen doesn't necessarily mean that it's easier. And this is why it's so important. It's actually becoming more complex, I would say, just in different ways. Here's the paradox. Fewer user designation doesn't mean less work. In fact, in some ways, it means hard work. And I'll explain why. The nature of sanctions updates is changing. We are seeing more modifications to existing entries, changes to names or alliances, addresses, identifying information.

14:31We're seeing lots of delistings, like the 518 serial delistings I mentioned. Each delisting requires system updates and potentially unpreasing assets. Complex ownership structures, designations of entities with complex corporate hierarchies. And those are the most problematic probably. Emil mentioned the evasion tactics that are so important to follow. There are also statements of reasons updates, changes in the justification for sanctions which can affect how you assess risk. Those are all subtle changes that don't make the headlines like the major new designation rounds, but they require just as much attention.

15:13sometimes even more because they're easy to miss if you're not paying close attention. So if a firm is only focused on a new addition, they could completely miss out the listing and continue to build transactions from someone who's no longer sanctioned. That's a customer service problem and potentially a legal risk if you're effectively freezing funds without legal basis. And those evasion tactics that we mentioned are getting more sophisticated. Sanction parties don't just give up when they're added to the list. They still create shell companies with different names. They use family members or associates as fronts.

15:49They root transactions through multiple jurisdictions. They leverage cryptocurrency and informal value transfers. They exploit different differences between the regulatory regimes as well. So this means that you can't just rely on the exact name matching against the sanction list. You need sophisticated analytics, behavioral monitoring, adverse media screening, beneficial ownership analysis. It's all layered controls that detect the reality behind the facade. And we also have to take into account the regional divergences that are creating complexity. The EU, UK and the US sanction list are no longer perfectly aligned.

16:27And we're seeing different designation timelines, varying criteria for inclusion, different listing procedures, sector-specific differences, and so on. So it's really important also to look out for the enforcement expectations, which haven't changed at all. Those are all lessons learned for the market. We have to look into that so we can learn what the regulators are expecting the firms to do, like catch every update, no matter how subtle they are. maintain the effective screening systems, conduct the thorough investigation of hits, document all the decision-making, have robust governments and oversight, and obviously have everyone who is working within the sanction space not only being trained, but to keep up with all the changes in terms of gaining that knowledge constantly.

17:18So yeah, it's quite challenging, I would say. Yeah, no, absolutely. James, as Katharina's outlined, this is a really complex space for people working in financial services. From what you're seeing, are financial service organisations just looking to do the bare minimum in this space? Or are people really trying to go down all of these different avenues and explore all of these different ways to fight the issues that Katharina outlined? Yeah, I think Katharina's outlined, there's a number of different areas there to consider. right? That's a lot for firms to be thinking about and ready assessing when they get into it.

17:55I think from my experience what we've seen out there is going to be a spectrum of responses in relation to that particular question and it does go from the do the bare minimum, take your tool off the shelf, put your customer list through it, I hope it works, all the way through to the more advanced fintechs who are now looking at the use of AI and machine learning to augment their already existing rules-based approaches, and also making that wider consideration around culture and training that Catherine has alluded to as well. So it's like anything in our sector, it's a real range of approaches to this.

18:35A lot of it's dependent on the business models of the firms and the product sets they've got. They may not feel as though that they're as exposed to sanctions as maybe some of the other firms are with their product sets, which is fine but unless you've made a thorough risk assessment in relation to sanctions risk that's almost you know lip service to an extent so definitely a definitely a spectrum on this in terms of what people are focusing on certainly seen examples as katherine has alluded to of where there's been divergence of sanction lists and also sectoral sanctions sometimes really focusing on on their product sets and what's really important to them and where their risks are and focusing in and really looking at specific risks in certain areas whilst not stopping doing anything else but really taking a very focused risk-based approach to their potential risk models because of all the things Katrina's alluded to in terms of ownership structures and all these evasion tactics as well.

19:34Yeah, Emil, this is obviously a very complex topic which uses up a lot of time and energy and resources for internal compliance teams but if they don't nail this what does it look like when the system breaks like does this have ripple effects does this impact customers more broadly i wouldn't say it impacts customers um other than if you have a name that is very uh i like a name on the sanctions list you might face a few delays with your payments or have a few additional questions from your bank but i think we need to kind of think about sanctions is are in place for a reason right they're in place to restrict say russia's ability to obtain certain elements that it needs for its missiles that it's sending into ukraine so if the system breaks so to speak and banks are allowing payments to go through or payments to be processed that ultimately results in the delivery of those goods into russia and then ending up on the battlefield that has real world consequences.

20:38And I think that's important to keep in mind. In the UK and many other jurisdictions, sanctions is a strict liability and very high risk area. And that means that saying I didn't know is not a defense when it comes to sanctions. And regulators are likely to want to unpack exactly how did firms make an assessment of their sanctions risk assessment? Did they tailor their controls adequately to respond to that risk exposure that they've identified? And if there are any areas where they have said reduced screening or not screening certain customer base, that needs to be justified and sort of well explained to the regulator.

21:22And again, strict audility means high potential enforcement actions here. Yeah, no, for sure. Really, really essential. Katarina, as we've touched on in the conversation already, we are seeing divergence across regions. How do you think that regional divergence is impacting how fintechs and financial services are responding in this space? Is it making life more difficult? Yeah, I'll say it's becoming more challenging with practical issues for globally operating fintechs. And it's a trend that's accelerating post-Brexit. Historically, EU and UK sanctions were identical because the UK implemented EU sanctions directive as an EU member state.

22:08But since Brexit, the UK has its own sanction regime. And while there is still a significant alignment, and we're seeing meaningful divergences that emerge. And to give you some more concrete examples of what this looks like in practice, you'll see differences in timing. The EU might designate an entry on Monday, the UK on Wednesday, and the US two weeks later. It's not, or not at all. So during those gaps, what do you do if you're in a fintech with customers in all three jurisdictions? Do you apply the most restrictive standard? The EU risk one jurisdiction combines the server customer in another.

22:46Then, of course, scope differences. The UK can be more aggressive in some areas. For example, I'll give you anti-corruption sanctions targeting individuals under the UK global anti-corruption sanctions regime. The EU and US might not have equivalent designations or sectorial variations, particularly around Russia. We see differences in energy sanctions, technology export controls, financial services restrictions. The UK approach to Russian oil and gas has diverged from the EUs at times. And then the delisting processes. Different jurisdictions have different procedures and timelines for removing individuals or entities from the list.

23:31series of recent examples where EU and US approach may be shown as different for fintechs this creates could create some of the pain points I would say like with the system complexity your screening infrastructure needs to handle multiple lists with potentially different matching rules you can just screen against one consolidated list in certain situations so you also have customer experience you have to keep in mind, like imagine a customer who can bank with you in London, but not in Amsterdam because of the list differences. That can be confusing. Risk decisioning is also important for there is a partial match or an entity connected to someone on only one list and how to make risk decisions.

24:17So you need the staff that understands the differences. And of course, the resource allocation, you need compliance expertise across multiple regulatory regimes, which is expensive. especially for smaller fintechs and don't forget audit and documentation you need to demonstrate to multiple regulators that you're complying with each specific regime's requirements that's particularly challenging in these differences that might not often be subtle so it's not like EU and UK lists are completely different by the way they're probably like 90 to 95 percent overlap. But it's that 5 % to 10 % difference that causes problems precisely because it's easy to miss.

25:01But yeah, lots of challenges across because of those differences across different agencies. Yeah, I just was going to add to that because I think with fintechs in particular, it's important to keep in mind that especially fintechs without their own banking license often screen according to their banking partner's risk appetite. So while there could be a competitive advantage, a fintech in Singapore, sure, doesn't have to comply with UK or EU or even US sanctions list, but it probably needs to if it wants to keep its banking relationships happy, if it wants to kind of think about its reputational risk.

25:42But also what we haven't talked about yet is the secondary sanctions enforcement risk, particularly from the US. So if you make a choice not to screen against the US list or you are involved in payments that would otherwise be prohibited if you were screening against the US list, you could potentially end up on the sanctions list yourself. So that's a tricky position for fintechs. And I think many are too cautious to actually fully kind of take advantage of jurisdictional differences because of that. I'd echo exactly what Emile's saying there. There's certainly considerations that we see out there.

26:21And I think firms taking that more general approach, if we can call it that, I think, because of their banking partners, absolutely valid. We've also, as we pointed out, we've got to consider the reach of these designations. Emile's mentioned, you know, OFAC has got the widest reach going as soon as you trade in a dollar. and that's it, they're all over you. So there is definitely probably a cautious approach, I think, for a lot of fintechs in relation to any sort of divergence, looking at the differences between the different sanction lists at this time. That may evolve over time, potentially.

26:59But certainly, I see more of a general approach to making sure that touching the EU, UK, US, EU lists, that is the be-all and end-all at this stage. And again, that may change. There could be some specialization or there may be some way of doing this. But I think the reach of those sanctions means that if you are an international fintech, you've got to be wary of the subsidiaries, the entities that you've got as part of your global firm and what that effect might have in terms of whether they're brought into the scope of those broader designations. Absolutely. Okay, we're going to take a very quick pause here, but coming up, we're going to turn to how fintechs can respond.

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