Sanction checks are a vital component of any effective compliance program because they help organizations identify and prevent business dealings with individuals, entities, or countries that are subject to government-imposed restrictions. These restrictions, often issued by authorities such as the Office of Foreign Assets Control (OFAC) or the United Nations, are designed to combat terrorism, money laundering, and other illegal activities that threaten national and international security.

Conducting sanction checks ensures that companies do not inadvertently engage with sanctioned parties, which could result in severe legal penalties, hefty fines, and significant reputational damage. Beyond legal compliance, sanction checks protect the integrity of an organization by promoting ethical business practices and reducing exposure to financial crime risks. Moreover, regulatory bodies increasingly require businesses across various industries to implement robust sanction screening processes as part of their anti-money laundering (AML) and know-your-customer (KYC) obligations.