Accuity, the leading global provider of financial crime screening, payments and know your customer (KYC) solutions, has announced the results of its 2019 survey of the global cargo industry, revealing that 80% of cargo firms are concerned about protecting their brand and reputation when it comes to trade sanctions and export risk.
Given that the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has filed a record $1.3billion of penalties so far this year spanning a range of industries, it is clear the cargo sector cannot afford to be a weak link in the supply chain.
The poll of senior managers from security, compliance, sales and operational functions, shows the industry is increasingly aware of the risks of non-compliance and beginning to take proactive steps to address them. When asked about the importance of effectively managing sanctions risk, 72% classified it as “somewhat” or “very” important. The most significant threats that drive this urgency include damage to brand and reputation (80%), fines and potential jail time for staff (68%), and loss of import, export, or forwarding licences and landing rights (62%).
Cargo firms have an obligation to screen documentation, such as air waybills and house waybills, to check whether the entities listed as part of a shipment are subject to sanctions and whether the cargo described contains dual-use goods (goods that can have both civilian and military purposes).
A guidance paper published recently by the International Air Transport Association (IATA), said this was “a priority for airlines which are all doing their utmost to develop appropriate due diligence procedures to manage shipments of so-called dual use goods, military cargo or embargoed/prohibited/restricted items.”
David Loeser, Senior Director of Product Strategy at Accuity said, “Dual use goods are incredibly difficult to spot. For example, what we know commonly as ‘tear gas’ could be listed on a document as ‘bromobenzyl cyanide’, by its chemical formula ‘C8H6BrN’, or even its CAS number ‘5798-79-8’.
“We cannot expect cargo operators to act as scientists, but they do have a responsibility to check their shipments for what could potentially be very controversial cargo. The only way they can fulfil this obligation is by implementing intelligent screening technology to automate the process.”
However, the survey also revealed some of the challenges that air cargo carriers and freight forwarders face when trying to achieve comprehensive sanctions compliance:
1. Keeping up with changing regulatory paradigms in the regions they do business (72%)
2. The rising cost of compliance (70%)
3. Repeated checks and manual processes (61%)
Exacerbating these challenges, 73% of those surveyed stated they still rely on at least some paper-based processes when managing air waybills and house waybills – a major hindrance for a sector that positions speed as its competitive advantage. Yet, firms are starting to realise that using technology to drive efficiency is the best way to address business risks, improve the efficiency of their operations, and moderate the cost of compliance. An overwhelming 78% listed automation as a high priority when considering a screening solution, with 70% prioritising a single system to streamline compliance checks.
Loeser continued, “Air cargo operators and freight forwarders cannot afford to fly in the face of regulatory guidance. Not only does a robust screening strategy protect them from reputational risk or loss of their licences, but it can give them a competitive edge, by equipping them to do business with confidence in areas their peers cannot.”
Accuity works with global air cargo operators, such as Lufthansa Cargo, to optimise their trade sanctions and export risk mitigation processes. With Firco Trade Compliance, a one-stop automated solution, air cargo carriers can screen data from shipment documentation against enhanced sanctions, politically exposed persons (PEPs) and dual use goods lists, ensuring regulatory compliance and increasing the efficiency of their operations.
View the infographic for the full survey results.