In third-party risk management, sanctions screening entails what?

• A. Verifying software licenses
• B. Auditing data storage locations
• C. Comparing pricing to market averages
• D. Checking prospective vendors against sanctions lists to avoid prohibited or high-risk counterparties

Answer: (D)

Sanctions screening is the process of evaluating prospective vendors against government and international sanctions lists to avoid doing business with prohibited or high-risk counterparties. This helps ensure compliance with trade controls and anti-money laundering laws, and it reduces the risk of legal penalties, fines, or reputational damage that can arise if a sanctioned entity is engaged or payment is processed through your organization. In practice, onboarding and ongoing vendor management typically include automatic checks against lists from authorities (like OFAC, the EU, the UN, and others) and flags for potential matches so you can pause or block a relationship if needed.

The other topics address different areas of vendor risk: software licenses relate to licensing compliance, data storage locations concern data privacy and security controls, and pricing comparisons focus on cost and value. None of these address sanction compliance or the risk of engaging with sanctioned or high-risk entities.