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Managing Blacklisted Vendor Risks with AI

on April 27, 2020

In 2019, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), which administers and enforces U.S. economic and trade sanctions, issued penalties against 22 companies. These organizations conducted business with blacklisted companies, or companies penalized because they are believed to engage in unfavorable or unethical activity, resulting in roughly $1.29 billion in fines.

The fines marked a significant increase from the seven penalties issued in 2018 totaling $71.5 million and reflect a new truth for organizations – the number and scope of sanctions may continue to increase, impacting more industries than ever before.

These fines associated with doing business with blacklisted companies are increasingly concerning in light of the global pandemic as organizations must minimize financial losses but may need to engage new vendors due to shortages impacting current suppliers. Ensuring that vendors are low-risk is vital in reducing possible spend risk.

Companies are taking extra precautions to ensure they avoid doing business with OFAC blacklisted companies, especially as budgets continue to tighten, and penalty fines could be detrimental to financial stability. But, navigating these sanctions becomes especially complicated as the number of blacklisted organizations and individuals is continuously in flux – in fact, in 2019, the U.S. Treasury blacklisted 900 individuals and entities.

Typically, to ensure alignment with current and new regulations, companies must manually compare their vendor master list to various watch lists, including OFAC’s list of blacklisted companies. The process becomes challenging as compliance teams must check new merchants, customers and vendors against the multiple lists while monitoring the frequently changing sanctions to ensure any current partners have not been added.

The current process isn’t foolproof – especially with large enterprise companies having a vendor master list of more than 20 million partner companies. It becomes nearly impossible to keep up with the ever-changing vendor lists and increasingly complex sanctions.

To reduce exposure to risk and improve compliance, companies should ensure they have 100% of spend data visibility to find and manage spend risk no matter where it resides.

Rather than spending time on the mostly administrative task of cross-checking the vendor master list against the varied watch lists, companies are finding success utilizing our AI-powered Payables platform. The platform allows compliance teams to take more proactive roles in investigating those vendors that may be high-risk.

Our partners count on Oversight to manage this process. In fact, in addition to OFAC blacklist monitoring, Oversight helps identify a number of other compliance risks identified in data sources, such as the FCP, which can be more complex. Oversight identifies these risks by scanning a company’s vendor master list against the U.S Government’s SAM lists, OFAC’S blacklisted companies list, and a variety of third-party records from Dow Jones, Thomson Reuters and more, utilizing AI to manage the process automatically.

Through this continual analysis and full visibility into the vendor master list, companies prioritize their most substantial risks. Oversight’s constant monitoring frees up compliance teams to handle and investigate high-priority vendor risks, ultimately elevating the role of the employee.

To support organizations during this time of crisis, Oversight is offering a complimentary Spend Risk Analysis of Payables programs. Schedule your analysis today and learn how you can improve compliance, establish stronger controls and protect your bottom line.

Nathanael L’Heureux

Chief Client Officer