Ed. Note-I often talk about compliance convergence. Today we host a guest post from our colleague and fellow UT Longhorn, Doug Jacobson. This article originally appeared in Doug’s blog, International Trade Law News. In his blog Doug discusses news, analysis and information on export control, sanctions, customs law, FCPA, anti-dumping and other international trade issues. We reprint his article, with his permission, in its entirety.
The Coalition for Excellence in Export Compliance (CEEC) (pronounced “seek”), a voluntary group of experienced export compliance professionals from leading companies, law firms, research organizations and consulting firms, recently released a series of detailed and practical standards containing best practices on a wide range of important topics for export and sanctions compliance programs.
CEEC’s mission is to provide a uniform set of best practices that companies and trade compliance professionals could use to provide clarity over the existing patchwork of official and unofficial guidance regarding export and sanctions compliance requirements and programs. The best practices are not tied to any particular country’s laws or requirements and are intended to be applicable worldwide.
To date, CEEC has issued best practices covering a wide range of topics, including: screening, training, classification, personnel, management commitment, license determinations and use, and intangible exports. Additional compliance-related best practices topics will be issued by CEEC in the near future.
CEEC’s best practices on Restricted Party Screening contains valuable guidance on restricted party screening programs and ways to implement screening programs. For example, CEEC’s restricted party screening best practices provides recommendations on the types of parties to be screened, how and when screening should be conducted, the structure of restricted party screening programs, the lists to check and how matches and potential matches to restricted party lists should be handled.
With respect to the types of parties to be screened, CEEC’s screening best practices note that both domestic and international transactions should be screened, since certain restrictions may apply to domestic transactions, domestic transactions may be part of an international transaction, and reputational concerns may exist. The screening best practices provide a detailed list of the types of parties that should be screened (to the extent applicable), including customers, suppliers, freight forwarders, banks, agents, ship to parties, etc.
CEEC’s screening best practices indicate that a “software tool should be used for screening” and that it should “employ a “fuzzy logic” algorithm to identify close as well as identical matches.” Of course, because restricted party list changes are often effective immediately, the “the automated screening tool must promptly update all applicable watch lists as these lists are changed and updated by issuing authorities.”
As for the structure of a restricted party screening program, CEEC’s screening best practices recommend that the screening process should be documented, and it could be “advantageous to centralize the screening program” in order to “minimize duplicative work and promote uniformity.”
Regarding the lists to check, CEEC advises that a “risk analysis should be done to determine which lists (by country, type, etc.) are needed for the organization to use for screening.” For example, it “may be appropriate to use different lists for different businesses, different categories of transactions, or different geographic locations.”
CEEC’s screening best practices provides specific information and guidance on the frequency of screening and at what point in the screening process screening should be done. For example, the best practices recommend that new business partners should be screened prior to the first transaction or other business dealing and that organizations “should consider implementing procedures to screen at the time the business partner is entered into the organization’s database, when background or credit checks are run, when quotes or proposals are requested, or at some other time, as appropriate.” The best practices indicate that “the intervals in between database screenings should be measured and limited in order to mitigate the risk of doing business with a restricted/prohibited/denied party.”
Finally, with respect to screening matches and potential matches, CEEC’s best practices state that an organizations’ restricted party screening process “must allow for a transaction to be halted unless and until any screening matches are cleared. To minimize business disruption, potential matches should be cleared as promptly as possible and the determination “should be documented.” When an actual match to a restricted party list occurs, the CEEC best practices advise that “depending upon the nature of the list, the legal applicability in the jurisdiction, and an evaluation of reputational concerns, the process must allow for determination by an authorized person whether the transaction may proceed . . . and this decision should be documented.”
CEEC members encourage comments and suggestions for improving the best practices and CEEC’s website contains a contact page for the submission of comments on their efforts to date.
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