It doesn’t take an expert in international politics to recognize that geopolitical tensions are still evolving with severe impact on the global economy. Well-known examples are the economic sanctions on Russia, imposed by the United States, along with the United Kingdom and European Union, and many other countries, in response to the invasion of Ukraine. That’s in addition to decades-long economic penalties and trade restrictions on Iran, Cuba, and North Korea to name a few.
Given that global sanctions and their enforcement have become a common course of action in trying to achieve foreign policy objectives in a volatile geopolitical landscape, businesses have to contend with the ensuing significant increase in financial, reputational, and operational risks brought on by these escalating regulatory activities. To mitigate these risks, companies must establish comprehensive sanctions screening systems to avoid running afoul of their compliance responsibilities. But how do organizations run effective sanctions checks amidst continuous change in denied parties lists and complex global sanction rules?
Careful consideration needs to be given to several factors when developing a global sanctions screening program. The organization needs to first ascertain the sanction risks it is exposed to, then map out a compliance policy and implementation strategy and finally earmark the resources it is willing to commit. For instance, manual screening will be especially disadvantageous to employ in this period of geopolitical uncertainties taking into account the dynamic and varied nature of denied party lists which require consistent and consolidated screening searches. It is important to note that fines are not only meted out for violations, but they are also issued for an organization’s poor sanctions screening practice.
To implement optimized sanctions screening procedures against denied parties lists requires an automated system supported by an intelligent sanctions list screening technology that can deliver compliance risk coverage at each point a business is exposed to external parties. Customer Relationship Management platforms and ERPs are designed to capture these data moments, and solutions such as Salesforce sanctions screening, which integrates the CRM with sanctions search technology have become critical partners for a business’ due diligence.
Companies leading in their compliance efforts like Movella, a 3D motion tracking service provider successfully transformed their expensive and time-consuming compliance process into an efficient and cost-effective system by seamlessly integrating global sanctions screening functions into its Salesforce platform.
What is Global Sanctions Screening?
Sanctions are prohibitions on economic activity that a country or international body issues against an entity – country, region, organization, or individual – in order to force them to act a certain way or refrain from a certain course of action. Sanctions can prevent the flow of money, resources, trade, or even data.
What does this mean for businesses? Sanctions with regard to international trade prevent domestic organizations from working with denied parties, which can include individuals or corporate entities in the target nation. Organizations need to be aware of the sanction lists applicable to their industry/country of operation and have the procedures to detect, notify and prevent their business from relating with any restricted party by cross-checking against a sanctions list. These detection, notification, and prevention activities are known as global sanctions screening.
Popular lists that a global sanctions search will be run against include OFAC sanctions lists (blocked persons and SDN lists), EU sanctions lists, and UN sanction lists. These lists are publicly available via the respective issuing bodies; however, they are only consolidated within 3rd party screening solutions.
How does a Global Sanctions Search Work?
Global sanctions search at its core involves comparing business information (name, contact, and other data) against a list of entities that have been barred, restricted, or sanctioned, and clearing or verifying if there is an accurate match. The screening process comprises of two intricate pillars: comprehensive and accurate information; and the logic that guides how matching is made and alerts are generated. The process sounds straightforward, which may create the impression that it can be effectively executed manually, but it entails more than searching the standard published denied party lists against contact information.
In several recent OFAC enforcement actions, the agency cited organizations for lacking sufficient incomplete data and having screening tools that were lacking in robust features and functionalities. For example in January 2022: a payments platform for Airbnb services settled with OFAC for $91,172 for violating the OFAC Cuba sanctions. OFAC noted that the company processed payments in which it failed to collect relevant information – guest country of residence and IP addresses – in order for the sanctions screening process to work effectively. In another instance in July 2021, OFAC cited an online cross-border payments company for screening issues that allowed close matches to SDN List entries to go unflagged by their screening software. They settled for $1,385,901.
These examples demonstrate the importance of maintaining accurate internal records combined with up-to-date screening technology.
Staying Ahead of Fast-Changing Denied Party Lists and Compliance Expectations
An increasing global sanctions and enforcement environment has left businesses grappling with maintaining optimal compliance. A company’s risk profile is exposed as new entities continually emerge on denied party lists with changes made as frequently as daily, and the nature of sanctions becoming more complex and varied in their bid to match foreign policy goals. The organization’s sanction screening needs to balance having the right control, automation, and customization to match the fluidity of the current geopolitical events.
Our guide on how companies can best accomplish robust and responsive global sanctions screening is outlined below.
Consolidate Global Sanctions Search Lists and Validate Data Sources
To reinforce their compliance procedures, organizations must evaluate how they perform with regard to having complete and accurate data which includes internal business records and external sanctions lists. An approach to capturing comprehensive information should be defined, as there is no centralized repository of sanctions lists, and some cases require more than list-based screening to be performed.
For instance, OFAC’s 50 percent rule which states that any entity directly or indirectly owned 50 percent or more in the aggregate by one or more blocked persons is also considered blocked. Complying with this rule requires that an organization’s screening tools be able to review and assess an entity’s ownership structure as well as denied party lists. The complexity of applying this rule has been demonstrated with the current expansion of barred Russian oligarchs. Businesses, therefore, need to invest in a sanctions list screening program that can deliver full spectrum data collection and multivariate screening.
Screen All Your Contacts
From restricted parties to politically exposed persons, 3rd party risks to a business’s reputation and compliance is presently high, so any business partner could potentially become a liability. So, whether you’re selecting a new distributor, choosing a new supplier for production, adding sales leads to your CRM system, or even just hiring a new employee, denied party screening should be performed on all leads, contacts, and accounts to establish whether the relationship is permissible.
Automate A Dynamic Sanctions List Screening Schedule
Sanctions screening is not a one-and-done exercise. A frequent, consistent, and automated process is required as sanctions lists are rapidly changing, and businesses gain new customers, partners, and employees. For each screening iteration, the global sanctions lists used should be the most up-to-date version and the controls utilized should be sensitive enough to identify sanctions evaders.
Empower and Upskill Compliance Teams
Reviewing potential screening matches and deciding on the accuracy of the result received is often nuanced and requires human adjudication. The employees who own this responsibility are, therefore, critical enablers of effective sanctions screening performance. An organization should plan for human excellence and error and take mitigation actions by investing in regular compliance training and development of the compliance team, as well as other departments in charge of acquiring the data that is being screened.
Leverage Screening Software Innovations
Accurate and effective global sanctions screening is a complicated task involving piecing together the multitude of sanctions lists and business information, being able to recognize detection avoidance tactics of denied parties, and having the resources to scan through high-volume records.
However, relentless innovation from screening technology companies that have developed solutions that can effectively extract, cleanse, aggregate, and accurately identify compliance risks. One effective solution is Salesforce sanctions screening software which combines the data collection capabilities of the CRM platform with a sanctions screening platform. By integrating screening into the CRM platform, organizations can accomplish their compliance needs and derive additional value from already existing infrastructure.
How Salesforce Sanctions Screening Addresses Compliance Challenges
Cost and complexity are often the biggest challenges to an organization’s compliance operation. With evolving regulatory demands, and deepening economic and political tensions, these pressures are expected to trend upwards further risking businesses. The combination of high-quality internal business data in Salesforce with a sanctions screening software’s comprehensive external sanctions lists and immensely powerful search functionality will provide screening efficiency and accuracy, eliminating duplicated efforts and reducing risk.
Salesforce sanctions screening is effective because the compliance functions are integrated directly into the platform via reliable third-party technology providers, making it an efficient way to comply with countless and constantly updated regulations both local and global. This platform can be programmed to automatically screen all leads, contacts, and accounts against a continuously refreshed database of consolidated denied party lists and global watchlists that apply to the business. Screening functions can also be accessed and executed easily across the organization.
Movella, which has already adopted Salesforce sanctions screening to accelerate its denied party screening process has reported benefits to include elevated compliance, greater efficiency, better sales management, and a reduction in costs associated with running a compliance program.
Reduce Risk and Refocus on Growth
Recent geopolitical events have only emphasized the importance for organizations to have effective global sanctions screening programs. By implementing the proper protocols, human resources, and technologies like integrating Descartes sanctions screening solutions with Salesforce, an organization can be prepared for new regulatory changes and continue to operate with clarity, confidence, and full compliance.
How Descartes Can Help
Descartes's solutions are flexible and modular, allowing organizations to pick the specific and exact functionality and content they need for their particular compliance needs and scale up later as and when necessary.
Read our white paper to get more detailed information about performing Effective and Comprehensive Denied Party Screening within the Salesforce CRM or visit our Salesforce screening resource center.