In this week’s 3 Minute Explainer we look at the necessity of restricted party screening, and how automation can help ensure compliance with global trade regulations.
Would your company willingly work with someone profiteering from organized crime? How about someone engaged in the illegal proliferation of nuclear weapons or terrorism? For the vast majority of businesses the answer is a resounding “no!”
But could your company inadvertently trade with such a person? If you have inadequate screening processes, then the answer is “possibly.”
Sometimes called sanctioned party list screening, restricted party screening aims to prevent that. Simply put, restricted party screening is performing the necessary checks to ensure that your trading partners are not criminals, terrorists and so forth.
Governmental bodies and international organizations publish lists of groups and persons with whom it is illegal to trade. These lists are known as denied party lists (DPLs) or restricted party lists (RPLs).
Companies engaged in international trade must comply by export controls and screen their trading partners against these lists. That, in essence, is restricted party screening. Screening can be done manually or by automated software solutions.
Companies shipping low volumes to one or two international destinations may be able to use manual screening successfully. However, when a company ships high volumes or ships to many international destinations, manual screening becomes almost impossible.
This is because of two reasons. Firstly, depending on where and what they ship, high volume shippers may have to screen orders against a number of different DPLs.
Secondly, these lists are subject to frequent changes. Names get added or removed from different DPLs every day. Therefore, ensuring your company is manually screening against the most up-to-date lists is a significant challenge.
Sanctioned party list screening software allows companies to automate these due diligence checks. Companies can automatically validate that they are not trading with denied parties, sanctioned countries or embargoed groups. Ideally, your software solution should offer daily updates to trade content so that companies are always screening against the correct data.
Companies can also add in an extra level of vigilance by against ‘Watch Lists’ for groups and individuals that have been convicted of financial, criminal, or ethics violations.
Any company engaged in exporting and international trade should screen their trading partners.
Having said that, for certain industries it is even more critical. Manufacturers of high tech or industrial goods, chemical manufacturers or life sciences companies, make products that have the potential to be misused. These are known as dual use goods.
Chlorine, for example, can be used to purify water; it can also be used to create chemical weapons. A GPS system can help you find your way home; it can also be used to guide a missile.
As a result of their products potential for misuse, manufacturers of dual use goods must take extra precautions screening their trading partners.
However, it is not only manufacturers and shippers that need to screen their trading partners. Banks and other service providers must do so too. Travel companies must ensure that they do not violate international anti-money laundering (AML) laws as well as comply with sanctions and travel ban regulations.
Banks must pay particular attention to AML regulations. These laws help to curb the financing of terrorism financing, profiteering from organized crime and the illegal narcotics trade and financial fraud.
Manufacturers in the United States must also abide by “deemed export” laws. Under these laws, selling goods, sharing restricted technology or even information with foreign nationals who are based in the US are treated the same way as an export.
Dual use goods, items that have an ECCN or are listed on the US Commerce Control List are, for the most part, subject to deemed export laws. In such circumstances, manufacturers are obligated to treat these goods as exports even when shipped domestically.
QAD Precision Restricted Party Screening software is used by high volume, high value and time-sensitive global enterprises. Our customers span multiple industries including banking and finance, life sciences, high technology, retail, industrial, automotive, higher education and public sector as well as logistics providers. To find out how QAD Precision can streamline denied party screening across your organization, contact us today.
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