Denied Party Checks (OFAC) - Fraud Library

The Fraud Practice eCommerce Fraud Consulting Services

Denied party check is used to check the federal listing of parties that merchants in the U.S. are prohibited from doing business with. The intent is to automatically cross check in real-time consumer information against lists provided by the U.S. government of designated parties for whom it is illegal to ship, trade or sell goods and services.

Enter your search terms Submit search form

Web www.fraudpractice.com

If you are a U.S. merchant there are certain companies and entities, people, you are prohibited from doing business with ...

Denied party check is used to check the federal listing of parties that merchants in the U.S. are prohibited from doing business with. The intent is to automatically cross check in real-time consumer information against lists provided by the U.S. government of designated parties for whom it is illegal to ship, trade or sell goods and services.

U.S. regulations prohibit the sale (trade) of goods and/or services to certain entities and individuals, such as known terrorists and other restricted parties, contained in lists issued by various U.S. government agencies. The Office of Foreign Assets Control (OFAC) in the Department of Treasury publishes a denied party list of restricted entities and individuals.

How Good Is It? 

There are providers of automated services and software to check for denied parties, and merchants can do this on their own. In general these solutions are fair, so make sure the solution that is chosen is using fuzzy logic. Fuzzy logic is the ability to see if the consumer data is similar to an entry on the denied party list. This is good to catch things such as abbreviations, misspelled words or variations.

Using a service means you don’t have to maintain the list of denied parties, instead you are paying for each use of the service.

          Features of denied party check include:

• It provides a way to screen orders with the posted listing without having to do significant coding
• It provides an automated way to update the information in the listing
• It provides a means for doing fuzzy logic matches
• It is not extendable to be industry specific
• It is available in the United States, Europe and Asia

Considerations When Implementing or Buying This Functionality    

•  What lists does the service get information from? For example, U.S. Government Anti-Terrorist, Embargoed Countries, International Traffic in Arms Debarment and Sanctions lists, and Specially Designated Nationals (SDN) and other Denied Persons lists, which may include terrorists, narcotics traffickers, and blocked persons and organizations.

• How often are the lists updated?
• Medical, drug and some high technology requirements differ greatly and merchants will have to put in significant updates to be compliant with these requirements for ensuring that they are not violating any laws.
• Does the service employ fuzzy logic for making matches?
• Is the service stand alone or part of a broader export compliance solution?

Estimated Costs – For service bureaus merchants will pay for each transaction, for software services they will pay quarterly or monthly subscription fees for updates.

Alternative Solutions – Some payment gateway services provide this service for free as part of their authorization services.

Vendors – CyberSource, Quova

How Does it Work?  

Typically this check is done before the authorization or fraud screen is executed. There are several lists that are maintained by the U.S. government of persons or companies in the U.S., and abroad, with which U.S. businesses are not allowed to conduct trade. Lists include:

1. Specially Designated Nationals (SDN) list, including terrorists, narcotics traffickers, blocked persons and vessels. Issued by the Department of Treasury, Office of Foreign Assets Control.

2. Denied Persons List (BXA) U.S. Department of Commerce, issued by the Bureau of Export Administration, includes individuals that have violated export laws, shipping prohibited goods to.

3. Entity List, U.S. Issued by the Department of Commerce, The Bureau of Export Administration, includes foreign end users involved in proliferation activities. These end users have been determined to present an unacceptable risk of diversion to developing weapons of mass destruction or the missiles used to deliver those weapons.

4. Embargoed Countries List, U.S. Department of Commerce, issued by the Bureau of Export Administration.

5. International Traffic in Arms Debarment List, issued by the Department of State, includes individuals convicted of conspiracy/violations of the Arms Export Control Act, who now are subject to statutory debarment from participating in arms export transactions.

6. Sanctions List, Department of State, Office of Foreign Assets.

How Do I Use the Results? 

Should a match occur, the requested transaction would be stopped before execution. It is recommended that a customer service agent review the order before any communication is sent to the customer or the product is shipped.

Building This In-House 

You can easily build a system to check for these addresses yourself. Just remember you have to constantly look for updates and make sure they are loaded into your system.

For More Information on Recent Export Regulation News:

http://www.cnn.com/2001/US/09/24/ret.bush.transcript/index.html

For complete details on the Executive Order issued September 24, 2001:

http://www.ustreas.gov/offices/enforcement/ofac/sdn/

Property of The Fraud Practice, all rights reserved, no unauthorized duplication, reproduction or distribution without the express written permission of The Fraud Practice.