With trade and sanctions regulations being issued at an unprecedented rate, organizations are struggling to stay compliant. In addition to being more numerous, regulations are also demanding that industry fundamentally shift their approach to compliance. Traditional screening tools only look for entities named on watchlists or directly linked to other entities named on watchlists, missing sophisticated bad actors who have evaded published lists but are still deemed risky by regulators.
As export and import (EXIM) trade compliance teams rally in response to this paradigm shift, they require more out of their risk management solutions. Here are three of the major challenges these teams face:
Lack of comprehensive risk coverage
Multinational trade compliance teams are struggling to stay compliant with the rapidly increasing sanctions and trade regulations. As changes to sanctions lists and trade regulations become more complex, traditional ways to uncover risk fall short. It’s helpful to understand the three approaches to risk identification:
- List-based risk identification
This is the most common form of risk detection, where entities are flagged solely based on their inclusion on official regulatory lists. These lists typically contain entities explicitly sanctioned or marked as high-risk by government or international agencies. Examples include the U.S. Department of Commerce’s Military End User (MEU) List or the Specially Designated Nationals (SDN) List. - List-aligned risk identification
This category of risk includes entities that aren’t directly on regulatory lists but are connected to those that are. These connections can involve ownership, trade relationships, or affiliations with sanctioned entities. For example, a company might not appear on the list itself but may be majority-owned by, or export goods to, a sanctioned entity.
More so than ever before, regulators aren’t solely providing lists of which entities to avoid doing business with. Regulators are now supplementing their usual entity lists with restrictions that apply to whole groups of entities based on one or more shared traits. Compliance teams now need to take a typological approach – one based on patterns of suspicious behavior – to uncover risk. This requires teams to have access to risk data that isn’t readily available from traditional providers – and that’s where the third category of risk classification comes into play.
- Non-list-based risk identification
This risk category is the toughest to identify. It includes entities that are not on official lists and lack direct connections to those that are, yet still pose risks based on regulatory narratives, typological profiles, or specific behavioral patterns.
Examples of these types of risk include companies operating in military-civil fusion zones in China or entities holding government licenses, such as those associated with the Russian FSB, which indicate potential engagement in high-risk activities. These entities are not explicitly named but can be inferred from regulatory guidelines and criteria.
Needing to adapt to regulations with speed
The current geopolitical landscape is in a constant state of flux — and governments are responding as best as they can to these events by rolling out new trade regulations as more information comes to light. For global enterprises, this makes the challenge of compliance a moving target. When regulators issue new guidance, trade compliance teams are expected to comply in a timely manner.
While there are repercussions for noncompliance with regulators, the consequences don’t end there. The sooner a team can identify a risky entity in their network, the sooner they can adjust their business operations accordingly so as to not disrupt the company’s overall bottom line. EXIM trade teams can’t afford to wait months for manually-curated risk insights each time a new regulation or sanctions designations in one of their operating countries is released. Risk solutions need to scale as quickly as regulations emerge.
Low confidence in risk decisions
This new world of typological or behavioral risk requires compliance professionals to make business decisions based on broad mandates like “avoid anyone helping Russia evade sanctions” or “ensure none of your products end up in adversarial hands.”
When risk goes beyond being on a list or being connected to a company on a list, the data used to uncover that risk needs to provide enough context and supporting information like corporate relationships, trade activity, and behaviors so that teams can confidently explain their risk determinations. Companies can speed things up and increase certainty by proactively whitelisting and blacklisting certain entities based on their profiles or behaviors and they can’t do so without the much needed context.
The solution lies with deeper risk data
In response to these new challenges, trade compliance teams should move away from traditional screening solutions that aren’t keeping up with new wave trade regulations. A solution like Sayari Signal uncovers complex, non-list-based risks within a broader context, providing the most comprehensive coverage of high-risk entities to help organizations balance compliance with seamless business operations.
>> Learn more about the launch of Sayari Signal <<
Sayari Signal detects characteristics of high-risk behaviors (e.g., military end-use, forced labor involvement) without requiring formal listings, providing organizations with deep context to make informed, proactive risk decisions. By leveraging a comprehensive global data network and advanced entity resolution capabilities to detect entities that align with regulatory risk profiles, even if they are not formally flagged, Signal can identify companies operating in high-risk sectors based on broader regulatory descriptions, not just known lists.
This capability gives organizations an edge in maintaining effective compliance amid rapidly evolving regulations. By mastering list-based, list-linked, and non-list-based risk identification, Sayari Signal provides a holistic, comprehensive risk view that traditional solutions lack.
To learn more about Sayari Signal, register for our webinar Introducing Sayari Signal: Comprehensive Risk Data Beyond Regulatory Lists.
