Part One: Why Testing Your Sanctions Name Screening System Is No Longer Optional

25th January 2026

Practical Sanctions Screening Testing

In today’s rapidly evolving sanctions landscape, financial institutions face mounting pressure to ensure their name screening systems are not only in place but demonstrably effective. Gone are the days when having a sanctions filter was enough to satisfy regulators. Across the UK and EU, authorities like the Financial Conduct Authority (FCA) and the European Banking Authority (EBA) are raising the bar, demanding that firms regularly test, tune and validate their screening systems to prove they work as intended.

This article kicks off a multi-part series exploring how financial crime prevention professionals can take ownership of sanctions name screening testing without relying on external vendors. We’ll unpack the regulatory expectations, walk through a practical internal testing framework and share best practices for building a defensible audit trail. Whether you’re a compliance officer, risk manager or technology lead, this series will help you strengthen your screening controls and meet the growing demands of sanctions compliance with confidence.

The Regulatory Shift: From Existence to Evidence

Regulators are no longer satisfied with the mere presence of a sanctions screening system. They want proof that it works consistently, accurately, and in line with your company’s risk appetite.

The EBA’s 2024 Guidelines, which came into effect across the EU at the end of 2025, explicitly require financial institutions to test the reliability of their sanctions screening solutions on a regular basis. This includes demonstrating that systems can detect sanctioned individuals and entities even when names are misspelled, transliterated or deliberately manipulated.

In the UK, the FCA has taken a similarly assertive stance. Following its review of over 90 financial institutions, the regulator highlighted widespread issues: over-reliance on third-party tools, lack of understanding of system calibration and insufficient oversight by senior management. The message is clear, firms must take ownership of their screening systems and be able to explain how they work, why they’re configured the way they are, and how they’re tested.

Why Internal Testing Matters

While external validation can be valuable, it’s not always necessary or feasible. Many firms have the expertise and tools to conduct effective internal testing, provided they approach it with the right structure and governance.
Internal testing offers several advantages:

• It builds in-house knowledge and ownership of the screening system.
• It allows for more frequent and agile testing cycles.
• It reduces reliance on external consultants and associated costs.
• It strengthens your ability to respond to regulatory inquiries with confidence and clarity.

But to be effective, and credible, internal testing must be rigorous, well documented and aligned with regulatory expectations.

What’s Coming Next

In Part Two of this series, we’ll dive into the “how”, outlining a step-by-step methodology for testing your name screening system internally. We’ll cover everything from defining your objectives and preparing test data, to analysing results and documenting your findings. You’ll also get the documentation you’ll need to build a bulletproof audit trail.

If you’re responsible for sanctions compliance, this is your opportunity to get ahead of the curve and turn regulatory expectations into operational strength.