PARTICIPANTS
User Experience
An End-To-End Payment Through Nexus
IPS & Bank Functionality
Sanctions Screening
FX PROVIDERS & LIQUDITY PROVIDERS
NEXUS GATEWAY & SCHEME
ANNEX: API & Message Definitions
ANNEX: Recalls & Unhappy Flows
Responsibility for sanctions screening in Nexus
In a Nexus payment, the following parties are required to perform sanctions screening on the Sender and Recipient. This also applies where the Sender and/or Recipient are companies rather than individuals.
Responsibilities for Sanctions Screening in Nexus
Sender
Recipient
Source Bank
The Source Bank will have already screened the Sender (their customer) as part of the KYC/KYB process when the Sender opened an account with them, and reviewed their status against sanctions lists as part of their ongoing customer-based sanctions screening
The Source Bank will need to screen the Recipient against the sanctions lists that apply in the Source Bank’s jurisdiction.
The Source Bank cannot rely on the screening performed by the Destination Bank because they are in different jurisdictions, so different sanctions lists apply.
Source Liquidity Provider
Likely to screen both Sender and Recipient against sanctions lists applying in the Source jurisdiction.
Could choose to rely on Source Bank’s screening of the Sender, since the same sanctions lists apply to Source Bank and Source Liquidity Provider. In practice, will prefer to do own screening of the Sender.
Cannot rely on Destination Bank’s screening of the Recipient, because different sanctions lists may apply in the Destination Bank’s jurisdiction.
FX Provider
Not required to screen Sender or Recipient.
Must perform correspondent banking due diligence on the Source Liquidity Provider and Destination Liquidity Provider when first establishing relationship.
Destination Liquidity Provider
Will screen both Sender and Recipient against sanctions lists applying in the Destination jurisdiction.
Could choose to rely on Destination Bank’s screening of the Recipient, since the same sanctions lists apply to Destination Bank and Destination Liquidity Provider. In practice, will prefer to do own screening of the Recipient.
Cannot rely on Source Bank’s screening of the Sender, because different sanctions lists may apply in the Source Bank’s jurisdiction
Must perform correspondent banking due diligence on the FX Provider and screen the FX Provider against sanctions lists when first establishing the relationship.
Destination Bank
The Destination Bank will need to screen the Sender against the sanctions lists that apply it the Destination jurisdiction.
The Destination Bank cannot rely on the screening performed by the Source Bank, because they are in different jurisdictions so may refer to different lists.
The Destination Bank will have already screened the Recipient (their customer) as part of the KYC/KYB process when the Recipient opened an account with them, and reviewed their status against sanctions lists as part of their ongoing customer-based sanctions screening
Reliance on other banks' screening
Where two banks involved in a payment are in the same jurisdiction, the same sanctions lists will apply to both of them. Regulations typically allow one institution to “rely” on the screening done by the other, to avoid duplication of the screening process. However, each institution if failures in sanctions screening allow an illicit payment to be made. This means that in practice, few banks will rely on the sanctions screening performed by another bank.
This means that although the Source Liquidity Provider could rely on the screening done by the Source Bank, and the Destination Liquidity Provider could rely on the screening done by the Destination Bank, in practice the Liquidity Providers will still want to perform their own screening, even though it means duplicating work.
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