Denied Party Screening

Remaining compliant with all regulations in both your country of origin and destination is a critical part of smooth international trading. As well as ensuring you're making the right customs declarations for your goods, it's also important to know who your buyers are to make certain you aren't falling foul of any sanctions or export controls. This is where denied party screening comes in. 

Denied party screening is the process of checking potential customers or business partners against published lists of sanctioned parties that governments have prohibited enterprises from doing business with. These individuals or organizations are not permitted to send or receive goods or documents, either directly or via intermediaries.

There may be a number of reasons for this, from corrupt business practices to matters of national security and ties to terrorist groups. Key lists include those maintained by the US' Bureau of Industry and Security (BIS), the EU's Financial Sanctions Unit and the United Nations Sanction List.

It is the responsibility of exporters and freight forwarders to ensure the recipients of their goods are not on relevant sanctions lists, and it is illegal for firms to ship items to anyone who appears on a denied party list.

The consequences of failing to screen buyers can be severe, with penalties ranging from large fines and the loss of export licenses to the prospect of imprisonment. In the US, the BIS can impose penalties of up to $1 million per violation in criminal cases, while individuals may face prison terms of up to 20 years. 

In one high-profile case, Chinese Telecom firm ZTE was hit with a $1.19 billion fine by the US in 2017 for violating export control laws by selling products and services in Iran and North Korea. However, small and medium-sized firms also need to ensure they remain compliant through the use of denied party screening.  

One of the biggest issues for firms undertaking denied party screening / restricted party screening is the scale of the challenge. There are more than 1,300 lists around the world detailing individuals and organizations that businesses should be wary of trading with, containing tens of thousands of sanctioned individuals. What's more, they are frequently updated, with new names being added or removed constantly.

As such, it is not usually practical to run manual checks on potential business partners or buyers. At best, this can greatly increase the time taken to meet compliance rules, while it can be easy to miss sanctions if using these methods.

To ensure you're remaining on the right side of the law, it pays to follow a few best practices when it comes to denied party screening.

The first step should be to have some form of automation in place to streamline the process of checking sanction lists. This reduces the chances of error and proves you're doing your due diligence effectively.

You should also be sure you're screening every export or financial transaction, ideally at first contact and when orders are shipped. Sanctions lists are fluid, so just because an individual or organization has passed denied party screening checks once, this does not mean they are guaranteed to continue to do so.

MIC’s Export Control Management (MIC ECM) allows for central management of all company transactions under export control law and detailed checks of  business transactions with respect to the relevant regulations. Clear status information and comprehensive check reports for each transaction ensure a complete and consistent audit trail. This includes screening of the persons and organizations involved in a given transaction against different sanctions lists (Denied Partry Screening), checking of the goods in consideration of dispatch and destination country, and documentation of end use and end users.