The process involves a considerable amount of data collection and checking not just at the start of the journey but at every stage of the trade. Compliance teams also face internal challenges such as pressure to meet shorter deadlines to get goods from A to B as quickly as possible. Additionally, import/export controls and sanctions policies are constantly changing. Trade compliance teams must stay ahead of regulations and best practices required by organizations such as OFAC and FATF as well as individual governments. Failure to do so puts them at risk of an enforcement action that could result in costly fines, lost revenue and reputational damage.
International trade exposes organizations to a wide range of risks and vulnerabilities that can potentially involve laundering the proceeds of crime and financing terrorist organizations. Because international trade transactions typically involve multiple parties, conducting due diligence can be extremely complex.
International trade also tends to be heavily document-based. This means there’s a possibility of documentary fraud, which can be linked to money laundering, terrorist financing and the circumvention of OFAC sanctions or other restrictions. Organizations face an ongoing challenge to digitize and make sense of disparate, unformatted data.
Trade compliance is about more than simply a vetting a customer, supplier or trade partner. All parties involved must scrutinize the specific aspects of each trade including the goods being shipped, their destination, their transport and their trade finance documents—applying the same level of due diligence at every step.
Manual procedures are inadequate, especially if they involve gathering data from multiple sources and in multiple formats. Further complicating matters is the requirement to do screening not only before the trade but also throughout the lifecycle of the trade.
This adds the additional burden of digitizing, automating and streamlining due diligence processes, data checking and process management to balance regulatory compliance requirements, business growth objectives and profitability.