What is Denied Party Screening?
Denied party screening refers to the process of comparing names of customers, business partners, facility visitors, etc., against official watch lists of individuals and entities with whom it is illegal to do business. Denied party screening is a crucial element of most export compliance processes, and can help maximize an organization’s export compliance coverage and safeguard them against violations.
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What is the difference between denied party screening and restricted party screening?
In common everyday language, denied party screening and restricted party screening can be and are used fairly interchangeably, and there is no functional difference between the two terms. However, strictly legally speaking, there is a difference between the two terms, which can have consequences on an organization’s export compliance process:
- A denied party is one that has had its exporting privileges revoked (or denied). It may still be possible to do business with a denied party and sell them goods and technology; however, if that denied party then exports or reexports the good or technology, it would constitute an export compliance violation. In such a case, the organization that sold them said good or technology would also be complicit in the violation. An effective way to preempt such outcomes is to insist on end-use and end-user statements.
- A restricted party is a party with whom trade or business is restricted. These restrictions can be partial – in other words, specifically preventing transactions and trade of certain specific goods or technologies with them – or total, meaning no business is allowed to be conducted with them.
What are denied party lists?
Denied party lists (or restricted party lists) are lists of individuals, organizations, and entities maintained by government and international bodies around the world with whom it is forbidden to do business, in whole or in part. The denied party screening process necessitates comparing the names of the parties and entities with whom an organization is engaged in business against the names on relevant denied party lists.
Who should be screened?
Most organizations that understand the necessity of screening also know that all customers should be screened. However, as a best practice, organizations should screen all entities they deal with. This includes suppliers, new employees, mergers and acquisitions, freight forwarders, business partners and associates, contractors, re-sellers, and even visitors to their physical premises.
When should screening occur?
Generally speaking, screening should occur at the first point of contact between the organization and the entity being screened. These checks should be made in a variety of situations, not just in terms of international trade.
For example, from the perspective of human resources, financial transactions, and on-site security, and a host of other scenarios where organizations come into contact with third parties.
Screening should also occur on an ongoing basis, because owing to the ever-changing nature of most denied party lists, somebody who may not have been on one previously may well be on it by the time of the next transaction with them. Screening continuously can help safeguard against unwitting export compliance violations.
Which denied party lists should organizations screen against?
There are hundreds of denied party lists, each individually maintained by different governments and international organizations around the world. Organizations should research the exact denied party lists necessary for them to screen against to be compliant.
For example, a U.S. based company that operates only domestically still has to screen against American lists – but it may not have to screen against watch lists of another country if it is not conducting any business there.
Do all organizations have to screen?
Yes. It is every organization’s legal obligation to comply with export compliance regulations that are applicable to them, and since most jurisdictions maintain denied party lists of their own, any organization that falls under their purview should be screening against relevant denied party lists to minimize its exposure to the risk of export compliance violations.
If organizations don’t export, do they still have to screen?
Yes, even organizations that are not exporting should be screening, at the very least against denied party lists maintained by their country’s governments. This is because even individuals and entities within their own country may be on these watch lists, and doing business with them could trigger a compliance violation.
How often should screening occur?
Organizations should look at screening all entities they engage with at the appropriate point of contact. However, denied party lists are changing almost constantly, and an entity that may not have been on one before may well be on it the next time an organization deals with them. It is, therefore, highly advisable to screen all entities an organization engages with every time an organization deals with them. Having a denied party screening tool with automated rescreening functionality in place, such as Descartes’ Visual Compliance suite of denied party screening solutions, can help minimize the friction and resources involved in the process.