Burgeoning sanctions on Russia and its allies following the invasion of Ukraine, along with expectations of yet more measures to come, are creating major compliance challenges for companies engaged in commercial activities in the Russia/Ukraine region, or with Russian-based and affiliated organizations anywhere in the world.
The Eastern European conflict clearly demonstrates the need for effective sanctions screening processes and procedures that can keep pace with the flurry of new regulations and additions to denied parties screening lists, and which can identify suppliers, buyers, and other trade chain partners with Russian shareholding deemed to be significant in the eyes of individual countries or trading blocs, such as the United States and the European Union.
What is Sanctions Screening?
Sanctions screening is also known as denied and restricted party screening. It is the due diligence set of tasks that organizations need to undertake to identify and remove denied parties from customer databases and supply chains.
The name of the game is to reduce the risk of inadvertently doing business with entities named in official government watch lists as being involved in criminal enterprises, money laundering, terrorist financing, human rights abuses, import and export trade violations, and sanctions evasion.
Latest sanctions Imposed on Russia
In their latest round of measures, the U.S., EU, and United Kingdom imposed sanctions on the 328 members that make up the Duma, the legislative arm of Russia’s government, as well as on the Duma as an organization.
They also slapped restrictions on more financial institutions, defense firms, infrastructure companies, and business elites. The White House described the latest moves as “unprecedented” aimed at targeting “the suppliers of Russia’s war effort and, in turn, their supply chain”.
G7 Initiative to Counter Sanctions Evasion
G7 nations, meanwhile, unveiled an initiative to share information and take coordinated response actions to enforce newly published sanctions on Russia, as well as its allies in Belarus and breakaway regions of Ukraine.
Leaders of the G7 said in a statement: “We task the relevant Ministers in a focused initiative to monitor the full implementation of sanctions and to coordinate responses related to evasive measures.”
Five Ways to Effective Sanctions Screening Compliance
Business observers said that the latest developments underscored the importance of sanctions screening to easily identify newly listed denied parties. This is especially in light of the fact that Russia has extensive business interests around the world, in particular China and a myriad of European countries, in such industries as energy, mining and minerals, transportation, and aerospace and defense.
The following five ways are among broader steps that an organization can take to not only comply with sanctions connected to the Russia-Ukraine war, but also to business risk management compliance in general.
- Screen customers, suppliers, and other trade chain partners: Make sure to screen against relevant denied parties lists including those from multiple jurisdictions. Also screen continually because, as the evolving sanctions landscape demonstrates, an entity deemed safe to do business today might be included in a watch list tomorrow.
- Screen against sanctioned ownership lists: Ensure that your due diligence efforts take into account companies with denied party shareholding. In the U.S., companies cannot transact with entities with 50 percent restricted party ownership, while it is more onerous in the EU. There are no official lists to screen against and organizations are best relying on software solutions providers.
- Screen IP addresses: Double check the location of the person you are doing business with, because sometimes they are not where they say they are. Screening IP addresses is the best way to confirm that they are not located in a country under embargo or international trade restrictions.
- Classify exports: In accurately classifying the products and technologies being sent overseas, organizations benefit from setting up and submitting to the government correctly completed export declarations and related documents, as well as applying for export licenses where they are required.
- Request end user certificates: One of the best ways to prevent controlled goods and technologies from being redirected to a sanctioned country. Its inclusion in the compliance process demonstrates the organization’s seriousness in having in place a robust risk mitigation system.
To meet fast-emerging compliance requirements, top-performing companies turn to sanctions screening software solutions providers. The reason is that they can more effectively comply with complex, ever-changing regulations as well as be in good standing with the government and their peers. Most importantly, they can focus on their core business objectives and enable growth.
How Descartes Visual Compliance and MK Denied Party Screening Can Help
As these sanctions continue to evolve and change, Descartes denied party sanctions screening solutions keep pace with the changes by continuously updating sanction party lists within the applications, as governments and other official organizations update theirs, to assist customers to screen simultaneously against multiple lists.
To help manage compliance risks more effectively, we provide a range of robust denied party screening and 3rd party risk management solutions as well as comprehensive and trusted trade content for leading business systems such as SAP, Oracle, Salesforce and NetSuite to name a few.
Descartes 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 these solutions, organizations can strengthen their compliance processes, enhance their competitive edge and increase sales velocity.