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[email protected]+1 (416) 510-8800 1
Denied Party ScreeningWhy, What, When, How?
Edward (Ned) BlinickChief Product Officer
James AnzalonePresident, Compliance Assurance LLC
Marina TruhanIntredex, Inc.
[email protected]+1 (416) 510-8800 2
Denied Party ScreeningWhy, What, When, How?
Edward (Ned) BlinickChief Product [email protected]
has been approved for 1 CES credit.
[email protected]+1 (416) 510-8800 3
Edward (Ned) BlinickChief Product [email protected]
Safe Harbor StatementThis presentation includes publically available data, opinions, estimates or other
information that might be considered forward-looking. While the statements enclosed represent current judgment you are encouraged to independently review all material
provided herein. The content is subject to change and modification and you are encouraged to seek legal advice as required.
[email protected]+1 (416) 510-8800 4
Edward (Ned) BlinickChief Product [email protected]
3rdwave is a global trade management solution that provides a fully integrated solution for managing and controlling global supply chains. It provides organizations with comprehensive trade compliance capability synchronized with global operations to insure total control and compliance of the supply chain.
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About James
James Anzalone is the president of Compliance Assurance LLC, a firm specializing in global trade compliance solutions. Mr. Anzalone has consulted firms of all sizes throughout the United States on the Export Administration Regulations (EAR), International Traffic In Arms Regulations (ITAR), Office of Foreign Assets Control (OFAC), Foreign Trade Regulations (FTR) and Customs & Border Protection (CBP) regulations. For over 20 years, James has developed comprehensive compliance programs including commodity classification, license determination, 'know your customer' checks, development of corporate policies and procedures and employee training programs. As an independent consultant, he has assisted companies with their Directorate of Defense Trade Controls (DDTC) registration, technology control plans, brokering activities, commodity jurisdiction, encryption control reviews, government mandated and internal audits and training, DDTC, BIS and OFAC licenses and a myriad of other import and export compliance challenges.
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About Marina
Marina Truhan is the business development manager at Intredex, a company specializing in export compliance data and software. Intredex offers web based solutions for denied party screening, product classification, automated license check and export control regulatory content. For over 5 years, Marina has been actively participating in compliance data collection, analysis, management, as well as testing process for Intredex’s GtradePro software. She regularly assists manufacturers, forwarders, R&D organizations and financial institutions on proper screening of the trade partners. Marina holds B.A. and M.A. in Legal Studies, and M.Sc. Degrees in International Relations with a concentration in National Security.
AGENDA
• Basics of Export compliance with respect to Screening • Designing a DPS Program • Handling Positive Hits • Obligations under “Know Your Guidance” • Consequences of Non-compliance • Case Studies of Non-compliance • Fine Tuning a DPS Program • The Role of Automation in DPS
Why Do We Screen?
• To Comply with U.S. and International Laws and Regulations • Arms Export Control Act (AECA) • Export Administration Act (EAA) (in effect through IEEPA) • TWEA, IEEPA, CISADA, Executive Orders, etc. • International Traffic In Arms Regulations (ITAR) • Export Administration Regulations (EAR) • OFAC Sanctions Programs • EU Sanction Programs
• To avoid potential illegal diversion • To ensure the integrity of our customers, suppliers, partners, and employees • To avoid fines, penalties, loss of export privileges, and loss of reputation
Designing a Screening Program
• Who Do We Screen? • What Do We Screen Against (the “Denied Parties” Lists)? • Who Don’t We Screen? • Who Conducts the Screening? •When Do We Perform the Screening? • What To Do When We Get a “Hit”? • False Positives • Direct Matches
What Do We Screen Against? • U.S. Department of State
• Nonproliferation Sanctions • AECA Debarred List (Debarred List)
• U.S. Department of Commerce • Denied Persons List (DPL) • Entity List (EL) • Unverified List (UL)
• U.S. Department of Treasury • Specially Designated Nationals (SDN) List • Foreign Sanctions Evaders (FSE) List • Sectoral Sanctions Identifications (SSI) List • Palestinian Legislative Council (PLC) List • List of Foreign Financial Institutions Subject to Part 561 • Non-SDN Iranian Sanctions Act List (NS-ISA)
• Foreign Government Lists
Who Do We Screen?
• Parties that You or Your Company Know or Should Know
• Customers • Ultimate Consignee / Intermediate Consignees • End-users • Suppliers and Subcontractors • Banks / Financial Institutions • Freight Forwarders / Carriers • Sales Representatives / Agents / Consultants • Employees / Contractors • Visitors and Their Organizations • Recipients of Technical Data/Technology
Who Don’t We Screen?
• Parties whom you would not reasonably have knowledge of • Unknown Employees of the Organization • Your Own Company and its Subsidiaries • U.S. Government Agencies • Stockholders of a Corporation???
Who Conducts the Screening?
•Person(s) With Knowledge of the Transaction • Sales • Customer Service • Accounting
• Automated Screening • ERP integrated screening • Batch screening • Re-Screening / Continuous screening
When Do We Perform the Screening?
• As Early In the Transaction as Possible • When Quoting New Business • When Entering Into New Business Relationships • When Establishing New Parties In Your Database
• At Any Material Change in the Order • Sold-To • Ship-to • Bill-to • Additional Parties (e.g. Int. Consignee, Forwarder)
• Immediately Prior to Export • Periodic Database Screening • When New Parties Added To DPL • Continuous (Re-screening)
What To Do When We Get a “Hit”?
• Have a Plan! • Know Who is Responsible for Clearing the “Hit” • Have a Procedure for System Order Hold and Clearing the “Hit”
• Verify the Parties Are the Same or Related • Country and/or Address • Look for Matching Character Strings • Review All Available Documentation (e.g. Email, PO, Contract) • Use Publicly Available Information
• Review the Federal Register Notice(s) • Review Biographical Info (Age, ID/Cedula, Affiliation) • What Does the FRN Restrict or Prohibit?
• Document Your Resolution • Communicate Illegal / Questionable Requests!
What To Do When We Aren’t Sure? • Escalate Internally
• Trade Compliance Manager / Empowered Official • In-house Counsel
• Escalate Externally • Outside Law Firm or Consultant
• Consult the Responsible Agency • DDTC Response Team (202) 663-1282 / [email protected] • BIS End-User Review Committee (202) 482-5991 / [email protected] • OFAC Hotline (202) 622-2490 / [email protected] • Homeland Security Investigations (HSI) (866) 347-2423 / www.ice.gov/webform/hsi-tip-form
Case Studies of Non-Compliance
PayPal Case
• Neglected to screen some in-process transactions until 2013
• “Short term fix” in which PayPal could "scan live transactions for sanctions-related keywords
• Fix didn’t stop almost 500 prohibited transactions and involvement in transactions with denied individuals
• In 2015 reached a settlement with the Treasury Department to pay $7.7 million for violations
Case Studies of Non-Compliance
AXA Equitable Life Insurance Case
• Issued insurance policies to individuals designated by OFAC. AXA and Third Party Administrator failed to screen the names of some policyholders
Humana Case • Humana and its subsidiary Kanawha Insurance failed to screen names of some policyholders against the OFAC
Compass Bank Case • Failed to identify and block accounts of
some individuals following OFAC’s designation due to a software misconfiguration
Best Practices in Timing & Ownership
- Purchasing - Procurement - Trade Compliance
• Suppliers • Vendors • Service
Providers •
Subcontractors
- Customer Service - Sales/Marketing - Trade Compliance
• Potential and existing Customers
• Recipients of software and technology
• Brokers • Financial
institutions
- Shipping - Receiving - Traffic/Logistics - Trade Compliance
• Intermediate and Ultimate Consignees
• End Users
- Human Resources - Security - Engineering - Trade Compliance • New hires • Employees • Visitors • Contractors • Consultants •
Representatives and Agents
Automated Screening Software
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Fine Tuning a DPS Program
• Reduce False Positives and Increase Positive Matches
• Tune your Search Criteria
• Adjust Sensitivity
• Exclude the Common Names
• Select the exact lists that need to be used • U.S. Government export denied/sanctioned lists • Foreign government export denied/sanctioned lists • International organization (U.N, etc.) lists • Sector specific lists (GSA, FDA, HHS, FBI, Interpol, World Bank, Inter-American Development Bank, etc.)
Fine Tuning a DPS Program
• Increase the chance of finding true match with further adjustments
• Exact name and address matching
• Phonetic name matching • Phonetic or “sound similar’ search • Generally use algorithms to find different forms of same/similar names
• Fuzzy logic searching • Fuzzy search for mistyped words • Generally use word-to-word difference computing algorithms
Phonetic/Fuzzy match example
Select the lists to use
Adjust Search Sensitivity
Fine tune your search criteria
Exclude the common words
Fine Tuning a DPS Program
Fine Tuning a DPS Program
• Dynamic Periodical Screening
• Record Retention • Per EAR Part 762 • See BIS –Elements of Effective Export Management and Compliance Program • Records suggested to retain:
✓Screening Procedure ✓Procedure for stopping, holding, and releasing questionable transactions ✓Related training records ✓Screenshots of screening result and chosen criteria ✓Notes on resolution of positive matches ✓Date and time, and name of the screening employee ✓If exists, approving manager/supervisor name and notes
Fine Tuning a DPS Program
• Coupling DPS process with End-Use Application Screening
• Diversion Risk screening (finding Red Flags) • Chemical and Biological Weapons proliferation screening • Nuclear Proliferation screening • Missiles, Rockets and Unmanned Aerial Vehicles screening • Restricted Country Military End-Use and End-User Screening
[email protected]+1 (416) 510-8800 25
Denied Party ScreeningWhy, What, When, How?
Edward (Ned) BlinickChief Product [email protected]
James AnzalonePresident, Compliance Assurance LLC
Marina TruhanIntredex, Inc.
