Automating Sanctions Compliance: Aligning Regulatory Technology, Rules and Goals

Abstract

The raft of sanctions introduced by governments throughout the world in response to the Russia-Ukraine conflict and other situations of international concern underscores the complex and rapidly changing nature of sanctions regulatory expectations. This article critically examines the extent of alignment between regulatory technology (RegTech) and sanctions compliance requirements, using the nascent Australian sanctions regime as an illustrative example. Applying insights from regulatory theory, the article differentiates between regulatory rules and goals to facilitate a nuanced evaluation of the prospects of automating sanctions compliance. It also analyses the potential disconnects between RegTech and sanctions rules arising from flaws in an automated system’s design, data inputs or underlying code, and mismatches between the capabilities of RegTech and the overarching regulatory goal of promoting a culture of compliance. The article argues that ongoing human interaction with well-calibrated RegTech tools is needed to promote alignment between RegTech and regulatory rules, and to meaningfully contribute to the broader culture of compliance goals. These insights have transferable relevance to diverse jurisdictions with complex sanctions compliance requirements and to other regulatory domains.

Keywords

• sanctions regulation
• compliance
• regtech
• automation