Complying with trade and export regulations involves due diligence, but using manual search for this critical task is too risky: survey

In H1 2021, two-thirds of banks, corporations and non-banking financial institutions (NBFIs) surveyed still use search engines to obtain information to meet with trade and export compliance regulations, according to Accuity.

Its survey involved ‘more than 120 professionals’ from leading banks, insurance and fintech organizations operating in APAC, EMEA and the Americas.

From this small study, the firm asserts that widespread manual search remains even years after the emergence of automated solutions to detect trade compliance risks.

All organizations involved in international supply chains are responsible for conducting due diligence on the parties and items involved in the transactions and shipments they facilitate. However, manual search processes can miss red flags and lead to misinformed decisions that expose organizations to risk and potential regulatory action.

Other key findings reported include:

  • Trade compliance was not always handled by a dedicated team: Respondent banks were managing trade compliance mostly through a dedicated compliance function. Non-banking financial institutions were handling it as part of the KYC process; corporations treated this as part of a central compliance function or general operational team.
  • Multi-variable screening was mostly limited to banks: More than 90% of banks in the survey screened for five or more data points, including sanctions, goods, vessel names and ultimate beneficial owners, compared to only a third of non-bank respondents.
  • Changing regulation posed challenges: The biggest challenges for banks and corporations in the survey were: keeping up with rapidly changing regulations and increasing expectations, while NBFIs found document-heavy processes the biggest burden.
  • Efficiency gains planned: Some 60% of respondentsfirms indicated that they planned to invest in the integration/interconnectivity of systems, with 74% looking to improve data sharing and transparency.
  • Compliance as an advantage: Competitive advantage was seen as the main benefit of trade compliance. Corporations in the survey reported less concern over fines, while prioritizing improving the flow of business through smarter license management.

According to Aneta Klosek, Director of Trade Compliance, Accuity: “Trade compliance is a critical function where mistakes can cost businesses millions. Getting trade compliance right can produce a significant competitive advantage, so there is every reason for firms across the breadth of the supply chain to make this a focus. We are seeing more banks and other organizations turn to comprehensive data and technology-enabled solutions to ensure their compliance framework is absolutely watertight, and they have flourished throughout the pandemic as a result.”