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Sanctions Screening in the Time of COVID-19

COVID-19 has made it harder for organizations to focus on third-party risks. So says a new report on the effects of COVID-19 on risk and compliance. The pandemic has resulted in “more opportunities for criminals to defraud consumers and companies.”

As the pandemic seized everyone’s attention, a consequence was relaxed pressure to sustain compliance and prevention efforts compared to 2019. Reorienting and enabling work by remote workers, not compliance, was top of mind. Meanwhile a host of bad characters sought to exploit the disruptions.

Among the report’s findings: 60 percent of 2,900 respondents agree that the pandemic forced them to take shortcuts with know-your-customer and due diligence checks. In the specific area of sanction screening, there is good news and bad. The good news is that 40 percent of respondents actually made sanctions screening a greater priority during Covid. Yet, in the broader picture, 56 percent admit that they “have not fully managed risks related to sanction screening.”

The report points out that while COVID-19 has been disruptive, compliance gaps were a problem well before the pandemic. For example, a 2019 risk survey found that 49 percent of third-party relationships had been subjected to due diligence checks, compared to 44 percent in this 2021 study.

This low compliance is in a time when, according to the European Parliamentary Research Service, disorder and tension have gradually replaced two decades of relative stability across the world. That 2019 report says, “Since 2012 … violent extremism, terrorism and hybrid threats have grown to constitute new sources of major risks to security, peace and stability around the world.”

Reasonably, then, the potential is increased for erroneous engagement with perpetrators of the threats, whether their goals are criminal or ideological. Compliance by U.S. organizations with U.S. government sanctions has never been optional, but it is increasingly imperative.

As a reminder, entities on the OFAC’s SDN list are not all as easily identifiable as an alien smuggling operation named “BARAKAT TRANSNATIONAL CRIMINAL ORGANIZATION.” They also include the following innocuous-looking entities:

  • 82 ELM REALTY LLC, 450 Park Avenue, Ste 1403, New York, NY 10022
  • ACCENTURE BUILDING MATERIALS TRADING LLC
  • BARBARO RECORDS, Calle 34, Local No. 10, Los Cachorros, Cristo Rey, Santo Domingo, Distrito Nacional, Dominican Republic
  • CONCORD CATERING, von Keyserling Mansion, St. Petersburg 119034, Russia

These are a minuscule few of the organizations on the sanction lists. It is illegal for your organization to transact business of any kind with them—no matter whether you are buying a piece of property or a supply of paper products.

U.S. persons and entities need to be reviewing their vendors against the sanction lists. To understand what compliance looks like, see OFAC: Are You Compliant or Just Think You Are?

One more thing. The study reports that those organizations that use innovative technologies are more aware and better protected from third-party risk. To learn how VendorInfo can help, contact us.

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