Under the Presidencies of Barack Obama, Donald Trump, and Joe Biden, the last few years of United States international relations have been marked by heavy use of export sanctions. These new regulations pose an additional responsibility for businesses, which must avoid working with restricted third-parties through a denied party screening process.
What is the nature of these sanctions, and what are their implications for local companies? This article will go into detail regarding export control compliance requirements and discuss some of OFAC’s related recommendations.
The Use of International Sanctions
The U.S. has immense influence in global trade and often uses sanctions as a geopolitical force for enforcing foreign policy. Recently, it has attempted to make these sanctions more “targeted” to avoid damaging businesses in the process.
Nonetheless, detractors of export controls claim that such sanctions are interfering with the work of genuine companies and humanitarian aid efforts.
Regardless of your stance on these topics, no one will deny that export compliance is largely the responsibility of businesses, and it’s up to them to conduct restricted party screening and avoid the associated legal penalties. Most government sanctions are now guidelines rather than explicit directives, so you are ultimately accountable for your own compliance.
The 5 Components of a Sanctions Compliance Program
Business owners and managers curious about how they can boost sanctions compliance in their respective organizations should look to the Department of Treasury’s Office of Foreign Assets Control (OFAC) for guidance.
OFAC offers an online resource for companies to adhere to trade sanctions and avoid doing business with restricted third parties. Consider the five essential components of a sanction compliance program.
1. Assessing Your Risk Level
Sanction violations can occur any time an organization interacts with a third-party. A complete risk assessment involves reviewing every potential touchpoint and checking for restricted parties.
It’s worth notifying the appropriate stakeholders about their due diligence whenever a major transaction occurs, such as an acquisition, merger, or onboarding. Being able to identify and address violations at every step of the process is key to promoting compliance.
2. Enforcing Internal Controls and Policies
Compliance can’t just stay in the meeting room of the upper management. It has to penetrate into the everyday workflows of employees at the company. Make sure that the policies you set are being followed during regular work processes and have controls in place to escalate and report on potential infractions.
Controls can also extend into communication with all members of staff, including business partners and any external party acting on behalf of the company.
3. Allowing For Comprehensive Auditing
The purpose of auditing is to enable awareness of how effective the compliance initiative is working. Audits will show whenever risk assessments change or whether new sanctions must be accounted for.
Internal auditors should be separate from the departments they are auditing to avoid a conflict of interest. They must have the skills and resources to analyze compliance effectively and notify management whenever issues arise in the audit. Perform these checks regularly so that problems are addressed before they become penalties.
4. Getting Management on Board
Proper attention to sanction compliance trickles down from the top. It is imperative that senior leadership be aware and supportive of the sanction compliance program. This group is usually capable of instilling the right policies for the rest of the company to follow and can catalyze a “culture of compliance” that resonates across the organization.
For example, senior management can delegate sanction responsibilities to a few professionals to promote compliance or provide adequate resources to compliance departments.
5. Getting Employees on Board
Just as important is regular training for staff members on sanctions-related responsibilities. Employees should feel partly accountable for ensuring legality during interactions with business partners, suppliers, and other third parties.
Stay on Top of US Sanctions with Descartes
There’s no denying the challenge for many businesses is effectively staying on top of changes to denied and restricted party watch lists and the latest sanctions.
To help manage compliance risks more effectively, Descartes provides a range of denied party screening and 3rd party risk management solutions, including integration with Salesforce.
Descartes Visual Compliance solutions are flexible and modular, allowing organizations to pick the specific and exact functionality and content they need and scale up later as and when necessary.
By utilizing our robust solutions, organizations can strengthen their compliance processes, enhance their competitive edge and increase sales velocity.
Are you interested in learning more about how Descartes can enhance sanction compliance program? Contact us today to get started.