Denied Party Screenings and Best Practices

It’s a matter of “Much ado about something. . .”
Make no mistake – denied party screening applies to you.  Don’t gamble with your export privileges by thinking “one size fits all”  when it comes to screening.  Instead, consider the principle of “screening smart”.  Take into account your business model and incorporate the Best Practices factors that will fit your organization’s needs. 

Denied & Restricted Parties – Best Practice Breakout
U.S. government agencies as well as international organizations and foreign government agencies publish lists of entities and companies that are denied or restricted from doing business with a US affiliated company. In the event a company, entity or person on one of such lists appears to match a potential party in an export transaction, additional due diligence is required before proceeding. Typically, depending on which list the match was found, it is recommended that companies and organizations should consult the requirements of the specific list on which the company, entity or person is identified by reviewing the Federal Register Entry and Agency rules for that particular list prior to taking any further actions.  Violation of the regulations can cause criminal and administrative penalties against the companies and organizations. Moreover, violators may be subject to denial of their export privileges, which essentially means the company is prohibited from participating in any future transactions.

The license exceptions that can generally be applied to export transactions, in most instances, are not available for use if the party is listed on the denied party lists. Rather, such transactions require an export license and are usually subject to a policy of denial.

Screening Process
Ensuring the end-user or recipient of the to-be-exported products, software and technical data, is not listed in the denied and sanctioned party lists is the only way to diminish the risk of violation to the export control regulations.  The practice is commonly called “Denied/Restricted Party Screening” and is achieved by processing the name of persons and entities against the governmental lists and identifying any possible matches prior to an export or a business activity.

Identifies Who Needs to be Screened
Based on best practices, organizations should follow the screening process below:

Again – based on best practices, these parties should be identified within a particular transaction and screened.  It is not always possible to make a full determination of participating parties, but those that can be identified should be screened.  You will notice that the list above is not necessarily a “transaction” based list.  Certain items like employees, contractors and brokers should be addressed from the perspective of the company interaction. 

Identify a Screening Process
Screening activity typically involves searching for name and address matches of the identified trade entities. Since the watch lists are subject to frequent changes that are often effective immediately, screening is essentially a repetitive task. The best practices in the industry today recommend three basic approaches in regard to the timing and nature of the screening.

Considering the fact that the most up-to-date restricted party lists should be used for any approach, screening can be manually intensive work. In cases with the existence of a large amount of trade partners, using a software solution is inevitable.  Automated software usually has the ability to employ a “fuzzy logic” algorithm, which searches for similar sounding names or phonetic matches in order to account for differences in native alphabets and foreign entity lists.