Glossary · compliance and risk
What is sanctions screening?
Sanctions screening is checking a person, company or wallet address against government sanctions lists before you transact with them. It is not optional, it is not a risk-based judgement, and getting it wrong is a criminal matter rather than a commercial one.
Why this one sits apart from the rest of compliance
Most financial compliance is risk-based. You assess, you document your reasoning, and a supervisor can disagree with your judgement without you having broken the law.
Sanctions are different. They are prohibitions. If a party is listed you may not transact with them, and there is no threshold, no de minimis and no argument from proportionality. This is why sanctions screening runs on every transaction rather than on a sample.
In crypto it has an extra dimension that traditional finance does not. Sanctions lists include wallet addresses, and blockchain analytics can trace whether funds arriving at your address passed through one. So screening covers not just who is paying you but where the money has been.
That is genuinely useful and occasionally uncomfortable. A payment can be flagged because of a hop several transactions back that your customer knew nothing about, and somebody has to decide what to do about it.
For a merchant the practical consequence is that your payment provider is doing this on your behalf, on both directions of flow, and that a flagged transaction will stop rather than settle quietly.
Compare
Sanctions screening and the rest of compliance
The difference is whether judgement is allowed.
| Sanctions screening | Risk-based AML checks | |
|---|---|---|
| Nature | A prohibition | An assessment |
| Threshold | None. Any amount | Risk and materiality apply |
| Discretion | None | Documented judgement is the point |
| Applies to | Every transaction | Proportionate to risk |
| In crypto, also covers | Wallet addresses and fund history | Customer behaviour and patterns |
| Getting it wrong | A criminal matter | A supervisory finding |
The last row is why screening is automated and universal rather than sampled.
What it means for you in practice
Three consequences, none of which require you to run screening yourself.
Your provider screens both directions
Inbound payments and outbound payouts are both checked. On a payout, a destination address that fails the check stops the payment rather than sending it.
Frequently asked questions
Do I have to run sanctions screening myself?
Not on payments processed through a licensed provider, because the provider carries that obligation for the transactions it handles. Your own obligations depend on your business and your regulator, and this is not legal advice.
Why would a payment be flagged if my customer is legitimate?
Because crypto sanctions lists include addresses, and analytics can trace funds through earlier hops. A flag can reflect the history of the coins rather than the conduct of your customer.
What happens to a flagged payout?
It stops before sending rather than going out and being unwound afterwards, which is the only sequence that works with irreversible transfers.
Is screening the same as KYC?
No. KYC establishes who somebody is. Sanctions screening checks whether you are permitted to deal with them. You can complete one and fail the other. KYC