Napier Chief Strategy Officer, Luca Primerano, was invited to speak at a Dow Jones webinar: Navigating the Challenges of Trade Compliance and Export Control in Asia Pacific, which aimed to help trade compliance professionals better respond to the ever-changing requirements on import and export controls. One key topic covered was the role technology has to play in screening and compliance, and the importance of utilising technology to keep up to date – and futureproof – your organisation.
If you missed it, here’s their three key recommendations for navigating trade compliance and export control in the APAC region:
1. Understand the latest regulations.
Wendy focused on one of the most complicated things the US has placed upon the shoulders of compliance professionals: the Department of Commerce’s Bureau of Industry and Security (BIS) Military End Use/User Rule of the Export Administration Regulations.
Crucially, since 2020, any end user that meets the definition of a Military End User (MEU) requires a license for the export of listed items (including material processing, electronics, telecommunications and many more), even if they are not on the Military End Use list and even if the item is destined for non-military end use.
This makes compliance and due diligence especially onerous since exporters must continue to conduct due diligence to ensure shipments of MEU items are not made to unlisted MEUs, or for military end uses.
The MEU Rule necessitates the need to understand how every entity you are shipping to will use the item to be exported, which in itself becomes a tricky area of due diligence. Reasons for why a customer is not a MEU should therefore be proactively justified.
To complicate things, the Military-Intelligence End Use/User is a separate, largely broader, rule that applies to users engaged in intelligence activities for the militaries of China, Russia, Venezuela and certain other countries.
There’s also the Chinese Military Industrial Companies List from OFAC, which applies to particular transactions and investments.
Whilst these lists are different, they all aim to prevent certain exports landing in the wrong hands and all need to be considered when screening.
2. Screening is integral to compliance, but challenging
Luca explained how third party and transaction screening must be an integral part of any trade compliance programme, but they are not without their challenges. In particular, there are a number of key regulatory compliance issues which are making compliance more difficult:
- Increasing transactional volumes
- Opaque algorithms based on thresholds and legacy tech
- Inflexible rules and workflows
- Difficulties in adding scenarios based on new regulations
These challenges in turn create operational issues including more false positives, increased time to review hits, suboptimal workflows, and the need to manually test scenarios.
False positives are typically caused by everyday difficulties including name variations and nicknames, spelling errors, missing names, handwriting differences and the need to account for cultural differences like multiple surnames and different alphabets.
3. An effective trade compliance screening programme is key
Having a good tech plan in place that encompasses third party and transaction screening can help manage trade compliance requirements and the many challenges that are associated with third party screening.
A good screening engine should provide a range of features, including the ability to:
- Set risk appetite and risk sensitivity
- Create rules and scenarios based on type of payments
- Search against thousands of names in sanctions lists
- Learn from user feedback
- Use all available data to discount or escalate
- Trigger actions in workflow
- Allow auditability
Luca explained that to overcome the burden of false positives, Napier’s screening solution connects into AI Advisor (its false positive reduction API) which applies rules, data and models to feedback a suggestion, score and explanation for the screening hit into the workflow.
Napier is able to help organisations reduce false positives in screening, helping to reduce the time it takes to review hits, mitigating risk and improving efficiency.