Trade Compliance 101

Restricted Party Screening—the who, what, when, where and how

While there is no “one size fits all” when it comes to screening for denied and restricted parties, from an export compliance standpoint, there are some tried, tested and true screening best practices that our long history in the industry has shown us better helps organizations stay on the right side of the export, financial and trade compliance laws.

In this installment of our Trade Compliance 101 series, we provide an overview of some of the best ways to help optimize restricted party screening compliance.

The Who

The “who” can be broken down into two parts:

  1. Who should be screened?
  2. Who should do the screening?

The answer to the first is simple—everyone with whom an organization does business should be screened. Even if not exporting a product or good, payment may be processed through a US bank, or in USD. This then makes screening everyone especially important given that these transactions fall under the jurisdiction of the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), regardless of geographic location.

It’s worth noting that as of the posting of this article, OFAC alone has levied over $1.2B in monetary penalties so far this year. Compare that to just over $71M total in 2018 and it’s clear that OFAC is casting a wider net than in years past. Likewise, the Bureau of industry and Security (BIS) issued over $1B in fines in 2018, compared to $287M in 2017.

As to the latter—who should screen—that really depends on the internal structure of the organization, the risk appetite, resources available, and so on. That said, to fully optimize denied party screening compliance, virtually everyone within an organization who interacts with a potential client, existing or repeat customer, supplier, vendor, and visitor et al., should be responsible for screening their respective contacts. Ideally there should be a record kept that demonstrates screening took place and that they are safe to do business with.

The What

For any product or good destined for export, the customer should be screened. And, for optimized compliance, measures taken to ensure the purchaser is also the end user. As noted above, there are also OFAC considerations to take into account with regards to transacting in USD or processing through US financial institutions.

The When

Ideally, screening for denied parties should take place at multiple points in the sales cycle, or throughout an ongoing business relationship. Along with the typical department tasked with doing the screening for their respective areas, the below includes, but is not limited to:

  • Upon first meeting a contact (Sales)
  • When point of contact or sale is first made (eCommerce, Sales)
  • When payment is processed (Accounts Payable)
  • When the order is about to be shipped (Logistics, Warehouse)
  • When an order is placed with a vendor/supplier (Procurement)
  • When a contract is about to be signed (Legal)
  • During a planned or impromptu arrival of a visitor (Security, Reception Admin)
  • When a repeat customer places an order (Sales, Customer Service)
  • Or anytime finances are about to change hands (potentially all the above)

The Where

As mentioned above, to cast the widest export compliance net as possible, screening should take place at the onset of a transaction (or even before pursuing the sale), and then again at various points throughout the business relationship. This is mainly due to the frequency in which watch lists change—often daily. For example, someone may place an order today, and by the time the item is ready to be shipped, they may have been placed on a denied party watch list.

Likewise, sanctions and embargoes are constantly in flux, so there are also potential export license considerations to account for.

The How

As to how denied party screening is performed, that is dependent on the organization. Smaller organizations may only need to perform a few screens a week. In such cases, because multiple mandatory lists must be used, an online denied party screening application should be sufficient.

Medium- to large-sized companies—or those with high transactions volumes ranging anywhere from a few hundred, to thousands or millions a week—would benefit from an automated restricted party solution that screens directly in one or more business systems. This helps free up staff hours by eliminating an additional manual step in the sales process, and redirects them to other core areas of the business.

Other time-saving screening options are using a daily re-screening service to re-screen every record previously entered on a daily, weekly or monthly basis. This helps remove the doubt that existing records won’t fall through the cracks as you’ll be notified if a match ever occurs. Additionally, initial and periodic bulk screening to screen any number of records all at once—the former to help bring a new export compliance program quickly up-to-speed by screening existing records, the latter to do a periodic health check to help confirm no individuals or entities were not screened in the interim.

The Wrap Up

We hope you found this article of interest, and that if you take away anything from the above, it’s that organizations should screen early—and screen often. Watch lists are constantly in flux, and maintaining constant due diligence is the best way to keep the feds away.


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