Who Are You Doing Business With?
In our ever-connected and increasingly global economy, aggregated, real-time global trade data—such as denied party screening results—helps businesses ensure protection and compliance. Denied party screening is critical in shipping and international trade, and essential for minimizing business risk today.
Country governments and international organizations maintain lists of people, organizations, and countries they are prohibited from doing business with. These lists include customers, suppliers, employees, and business partners for processes such as contracting, shipping, and payment.
Often, the burden to comply with restrictions is placed on those involved in shipment logistics, such as the exporting business, the logistics intermediary/freight forwarder, or the transportation carrier. But no single worldwide repository of denied parties exists, and it’s challenging for a company to collect, maintain, and update denied, restricted, and sanctioned data from multiple global lists.
Take Note of Penalties
While there is no legal requirement in the United States to screen, there are legal consequences for conducting business with denied or restricted parties. Penalties for non-compliance include criminal charges of up to $1 million for willful violations on restricted items, prison for up to 20 years per violation, civil fines, and revocation of export privileges or debarment.
In addition, because penalties are published publicly, non-compliance with trade restrictions can greatly damage reputations. Businesses today require sophisticated methodologies and technology-based solutions to help lower risk and ensure compliance.
Mitigate the Risk
While companies are genuinely willing to screen, part of the challenge in using denied party screening technology lies in matching capabilities with risk parameters and business needs. Companies need to sensitivity-adjust risk concerns and to choose industry-specific lists to ensure the proper breadth of screening coverage.
For companies with a low volume of business transactions, a web-based solution for individual searches in a unified, role-based platform works well. Those with a medium volume need to review thousands of customers or prospects against a selected range of denied and restricted parties.
Companies with a high volume of transactions benefit from a solution that proactively scans master customer data every time a new entry is made in a denied party list. For the largest global enterprises, a solution that integrates screening results with Enterprise Resource Planning/Global Trade Management systems is essential for a comprehensive trade compliance program.
Who Should be Concerned?
It’s a common misconception that screening applies only to companies that transact business internationally. At a minimum, all companies should screen customers, prospects, suppliers, and employees.
For those companies involved in global trade, denied party screening casts a wide net that encompasses shippers, intermediaries and carriers, forwarders, and customs brokers, in addition to exporters. Manufacturers, suppliers, and distributors should screen both internally as well as while goods are transported. Human resources and accounting should screen employees, vendors, and subcontractors.
Companies need to be aware of their legal obligation to ensure they don’t transact business with prohibited or restricted entities, corporations, countries, or people.