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From Trusted News Source To Trusted Trade Compliance Tool

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From Trusted News Source To Trusted Trade Compliance Tool

For the world's corporate compliance officers, Dow Jones Risk & Compliance has become an increasingly important tool in their efforts to avoid violations of economic sanctions.

This concern has been amplified in recent years, especially with the U.S. stepping up economic sanctions against overseas entities and individuals that it views pose a threat to national security or operate contrary to U.S. foreign policy.

With today's often long and tangled global supply chains, companies are more at risk than ever of running afoul of sanctions by unwittingly conducting business with blacklisted parties, which could result in potentially millions of dollars in fines and penalties from government regulators.

Dow Jones, a division of News Corp. (NASDAQ: NWSA) which publishes The Wall Street Journal among other newspapers, got its start in trade compliance about 20 years ago when one of its largest banking clients asked it to put together a "special interest persons" list to screen against when it took on new customers. This compelled the company to form Dow Jones Risk & Compliance in London.

"We started to get into trade compliance when we realized we had the processes, expertise and resources to monitor and curate sanctions content," said Guy Harrison, general manager of Dow Jones Risk & Compliance, in an interview.

He explained the trade compliance aspect of Dow Jones Risk & Compliance has become the largest and fastest growing piece of the business, exceeding $130 million last year and with continued year-on-year growth of more than 20%.

Dow Jones Risk & Compliance employs about 450 staff located across five offices throughout the world, including its London headquarters; Barcelona; Princeton, New Jersey; Shanghai; and Singapore.

"We have a global team of specialist sanctions-related researchers and they follow the same model," said David Hodgson, head of content strategists for the Dow Jones Risk & Compliance team, based in Barcelona. "So, when Singapore ends its day, Barcelona is coming on, and so on. It's really a 24/7 operation in terms of monitoring the actual regulatory lists that are published by sanction regulators around the world."

Dow Jones Risk & Compliance uses "open sources," including business registries, official gazettes, government and corporate web pages, corporate filings and media sources through Dow Jones Factiva, to build comprehensive profiles of sanctioned entities and individuals.

The company monitors many sources automatically. For example, it checks the U.S. Office of Foreign Assets Control's Specially Designated Nationals and Blocked Persons (SDN) List every five minutes of the day.

"However, the monitoring and detection that go through the automated processes always end up relying on human involvement. We do not assume that any tool that automatically gives you information is 100% correct," Hodgson said.

"What we're looking for is the most accurate, most up to date information," he added. "But importantly the research must be conducted in the relevant language."

Hodgson said Dow Jones Risk & Compliance offices have researchers who are proficient in key foreign languages, such as Russian, Ukrainian, Farsi, Korean and Chinese.

"One learns over time that the news has to be read carefully," Hodgson said. "Not all the news that comes out of the jurisdiction that you're interested in is necessarily reputable. And just because it's out there doesn't mean that it's correct. We're always double-checking and looking for additional sources than just news."

A key use of Dow Jones Risk & Compliance by corporate compliance officers involves OFAC's rules that preclude companies and individuals from conducting business with entities that are owned in aggregate of 50% or more by a sanctioned party. Over time, the so-called "50% rule" has become one of the most onerous sanctions compliance obligations for American and foreign companies involved in cross-border trade.

"What we have done here is cover entities that are owned and controlled by the sanctioned party," Hodgson said. "As long as the party is sanctioned by OFAC or the European Union, then we actually look at a 10% holding as a basis. The reason why we did that is we wanted a strong cautionary zone around the specifically sanctioned entities."

Brian Amero, head of global compliance and ethics for Boston-based Teradyne (NASDAQ: TER) and a member of the American Shipper Editorial Board, said he uses Dow Jones Risk & Compliance to screen all Russian orders for compliance with the 50% rule, as well as to learn more about new distributors and resellers for "an additional level of due diligence."

"You must be aware of the ever-changing U.S. foreign policy which uses sanctions to punish countries that don't fall in line with its political aspirations. In addition to Russia, entities in the Ukraine, Venezuela, Nicaragua, Turkey and China are creeping on to the OFAC list," said Paul DiVecchio, a 40-year export compliance consultant in Boston. "The Dow Jones Risk & Compliance is the only tool that I see out there that does the job."

"It provides a deeper level view of trading partners than just list-based screening," he added.

"You see technology companies that approach this from a purely technical angle and they think they can take these publicly available lists and smoosh them altogether into a big list that customers can screen against," Harrison said. "Without the additional research and content, those lists are unworkable for a large corporation or large bank that is screening against thousands if not millions of parties."

Dow Jones Risk & Compliance works with more than 250 trade compliance software partners. "We recognize that we need to be customer-led and where a customer chooses the particular piece of software, we'll do our best to work with them," Harrison said.

Dow Jones Risk & Compliance has also created online applications that allow companies to check their international business transactions against all major export control regimes, such as the Wassenaar Arrangement, Chemical Weapons Convention and U.S. Commerce Control List.

Its cities and ports data provide checks for sub-regions, cities, seaports, airports and free trade zones in sanctioned countries and regions. 

In May, Dow Jones Risk & Compliance added a trade compliance application via Pole Star that allows companies to check the activity of sanctioned vessels and even non-sanctioned vessels that may be linked to sanctioned countries such as Cuba, Iran, North Korea and Syria. 

Recently, Dow Jones Risk & Compliance introduced an adverse address screening product. Harrison said the product allows companies to be more proactive in terms of assessing associated risks with third parties. 

"These other specialty aspects are what customers need to successfully run their trade compliance programs," Harrison said.

Image by Markus Spiske from Pixabay

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