In this article, we will explain:
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- What are denied-party lists?
- What are the penalties associated with them?
- What is denied-party list screening?
- Why does your business need it?
- Features of an Ideal Denied Party Screening Solution
- What are denied-party lists?
What Is a Denied or Restricted Party Screening List?
Both terms refer to a collection of entities, either individuals or organizations, that are deemed unlawful to do business with to some extent or completely.
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- Denied-Party Lists contain entities who export, import, and/or exchange services and have been denied by a governing body (e.g. a Government Agency).
- Restricted-Party Lists contain entities who have been denied some business privileges. Certain types of transactions may be blocked, or a license may be required before any transactions with this party may take place.
Denied Party Lists are compiled by international governments and International organizations, such as:
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- U.S. Bureau of Industry and Security [BIS] (Denied Persons List, Entity List, Military End-User List, etc.)
- U.S. Food and Drug Administration (Debarment List)
- U.S. Treasury (Office of Foreign Assets Control Sanctions List)
- U.S. Securities and Trade Commission (Anti Money Laundering Checklist)
- U.S. Department of Justice (Foreign Corrupt Practices Act)
- United Nations (Sanctions List, Al-Qaida and Taliban UN Consolidated List)
- World Bank (List of ineligible firms)
- European Union (Financial Sanctions List)
Entities are added to a denied party list because of:
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- Being a terrorist organization or affiliate
- Being a threat to national security
- Having a history of corrupt or criminal behavior
There are more than 1,300 such lists an international business must take into account. Every individual and company, small and large, is responsible for adhering to these prohibitions.
Many individuals and businesses are prosecuted for breaches of denied-service lists every year.
Non-adherence Penalties
Every list and associated law has different penalties that can be levied against violators. The following are two examples:
The U.S. Bureau of Industry and Security maintains several denied and restricted party lists. Not adhering to their restrictions will result in heavy penalties:
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- Criminal fines up to $1 million dollars per violation.
- Incarceration for up to 20 years.
- Administrative penalties of $300,000 per violation or twice the transaction’s worth, whichever is higher.
- Loss of export privileges.
- Deportation of non-U.S. Citizens.
The Arms Export Controls Act (AECA) and the International Traffic in Arms Regulations (ITAR) are laws that limit what can be exported, rather than to whom. These two laws place restrictions on weapons, armaments, and defense systems. Refusing to abide by them will also result in heavy penalties:
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- Criminal fines up to $1 million dollars per violation.
- Incarceration for up to 10 years.
- Civil penalties up to $500,000 per violation.
Voluntary self-reporting done in the proper way can mitigate these penalties, but obviously, the ideal situation is to avoid breaches altogether by carefully screening any business transactions beforehand.
What Is Restricted Party Screening?
With so many different lists and such high penalties, it is vitally important for a business to make sure they adhere to these sanctions, but scanning through the lists manually for every transaction would be a fool’s errand.
The restricted-party screening process provides corporations with the ability to check all individuals, businesses, and countries against the most current restricted, denied, or prohibited party lists to ensure no business transactions occur with an entity that is prohibited by law.
Why Does Your Business Need Denied Party Screening?
Sanctioned party list screening provides an easy solution to otherwise daunting challenges.
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- The quantity and size of denied party lists are extensive. As an example, the BIS maintains a list strictly for denied individuals, and even that list of such limited scope contains more than 1600 individuals. It includes names, alias, and addresses that must all be taken into account. The same Bureau’s entity list is more than 600 pages long.
- The denied party lists are ever-changing. The BIS updated their denied persons list nearly once a day in the last two months of 2021.
- Governments require extensive due diligence in preventing and reporting violations.
Features of an Ideal Denied Party Screening Solution
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- A comprehensive collection of global watch lists. The ideal solution should make sure that every denied party list included is relevant to your sector.
- Daily updates. No matter how often a needed list is added to, updated, expired, or changed, the ideal solution should keep your business secure with the most up-to-date information.
- Defensible Audit Trails.It should provide detailed reports and extensive notifications for a robust due diligence process.
- Cutting Edge Algorithms. The ideal solution should leverage cutting edge technology with fuzzy logic to customize its parameters to match your business needs without sacrificing precision or risk reduction.
- User-Friendly Dashboard. It should have a user friendly interface for easy navigation between processes.
- Automated Alerts. It should keep users and managers updated on still pending actions like follow-ups, past due cases, and problem resolutions.
- Synchronization with other services.It should have the flexibility to fit into the value chain of your export control compliance activities Export Shipment Process and Import Process.
- Integration with ERPs and Business Systems. It should have the technical ability (via API’s, adaptors etc.) to fully integrate with your existing internal technology platforms and screen parties directly from your business systems without needing to open any other application.
The solution is restricted party screening software, such as what is offered by OCR Services Inc.. To learn more about OCR’s Watch list Screening Solution, trusted by hundreds of organizations globally, please reach out to us at sales@ocr-inc.com.
