Every financial transaction with a foreign entity is a potential trade compliance violation.
Financial transactions with an entity on one of many government watch lists pose significant risk to companies in the financial services sector, and in the controlled-goods space. You could be committing violations of export control and FinCEN regulations right now, or they could be hidden in your books, or those of companies you have or in are considering acquiring.
The severe penalties of violating the regulations, including fines, restrictions on business activities, incarceration, and damage to personal and corporate reputations invites appropriate due diligence measures to protect individuals, executives and the corporation.
In most time-is-money, high transaction volume / low revenue environments, a key challenge in anti-money laundering due diligence is finding solutions that add negligible incremental transaction costs and are almost invisible to throughput.
Financial Services companies have screening mandates that include OFAC
Financial services companies subject to FinCEN and the Bank Secrecy Act (BSA) have a set of watch lists against which screening is typically performed to ascertain transactions for inclusion on SAR and other reports. more +
Most companies include a broad range of lists, including Patriot Act Section 311, FinCEN 314a, Politically Exposed Persons (PEP), FBI, OSFI, UK Consolidated (formerly the Bank of England consolidated list), EU Consolidated and FATF.
When the USA Patriot Act was introduced, in amending the BSA to strengthen U.S. measures to prevent, detect and prosecute international money laundering, it added the requirement for financial service companies to screen against the U.S. Treasury Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) list. It also added requirement for these companies to ensure compliance with OFAC country-based sanctions.
As part of corporate anti-money laundering (AML) and know your customer (KYC) programs, financial service companies are concerned with ensuring screening accuracy while minimizing the workload involved in false positives, particularly when screening against the OFAC Specially Designated Nationals (SDN) list.
Companies in the controlled goods space
Controllers, executives and board members of companies dealing in controlled goods, technologies or services face heightened compliance risks and requirements. Regulatory criminal and civil penalties aside, it's not good for business to be publically exposed as a company that compromises national security. more +
To ensure compliance, companies are concerned with classifying the goods and services they provide, managing their licenses and agreements, and screening against government lists:
- Are the items on the Directorate of Defense Trade Controls (DDTC) USML list or the Bureau of Industry and Security (BIS) CCL list of military goods? Are licenses or technical assistance agreements required based on the classification and the end-user, end-use, destination and employee or contractor nationality?
- How much room is there on the licenses? Do they satisfy the pipeline, marketing plans and expansion strategies?
- Are the parties on the BIS entity, denied or unverified lists, the DDTC debarred parties list, the OFAC specially designated nationals list, or other national and international watch lists? When was the last time they were screened?