Denied Parties and “False Hits”

One of the controls the U.S. government places on export activity is the Denied Parties Lists (also sometimes referred to as Restricted Parties Lists or RPL). These lists consist of both foreign and U.S. parties that are prohibited by varying degrees from engaging with U.S. businesses. Anyone questioning the importance of a denied parties screening process need look no further than a recent story by WorldECR (Issue 45, November 2015). This story reports how three non-U.S. banks were fined more than $1 billion due to U.S. sanctions violations. At least some of these violations resulted from the bank’s failure to manage its “false hit” list.

So, how do you ensure that your company avoids dealing with denied parties? In short, by conducting proactive and periodic searches of the U.S. government’s lists. These lists are numerous and they change frequently. Thankfully, the government publishes a consolidated version of the screening lists here.

Searching the lists can be done manually, but more often, companies will utilize any number of automated screening software solutions on the market today. This software (such as eCustoms’ Visual Compliance), will scan the lists for exact and “fuzzy” matches using a variety of search criteria. The results are instantaneous. However, these results must be reviewed to weed out “false positives” from “actual or true matches.” (An example of a false positive would be a “John Smith” on government’s list who is not the same “John Smith” that works for your company.)

Resolving false positives can take time, depending on the number of records screened, but the software does a lot of the legwork for you. Also, most programs will allow you to tweak their search algorithms to help keep false positives manageable. This doesn’t mean that once a potential match is resolve all of your work is done. The Treasury Department offers the following guidance for periodically reviewing and reassessing your company’s false hit list.

Whether your process is manual or automated, at the end of the day, it will take a human being to actually manage your screening process and resolve the inevitable false hits that will occur. This person (or team) will play a critical role in keeping your company out of trouble.