Reputational risk drives cargo firms into export compliance with rules
THE vast majority of cargo firms are concerned about protecting their brand and reputation when it comes to trade sanctions and export risk, according to a survey by Accuity, a provider of financial crime screening and payments solutions, reported London's Air Cargo News
THE vast majority of cargo firms are concerned about protecting their brand and reputation when it comes to trade sanctions and export risk, according to a survey by Accuity, a provider of financial crime screening and payments solutions, reported London's Air Cargo News.
'The poll of senior managers from security, compliance, sales and operational functions, shows that the industry is increasingly aware of the risks of non-compliance and is beginning to take proactive steps to address them,' said an Accuity statement.
When asked about the importance of effectively managing sanctions risk, 72 per cent classified it as 'somewhat' or 'very' important. The most significant threats that drive this urgency include damage to brand and reputation (80 per cent), fines and potential jail time for staff (68 per cent), and loss of import, export, or forwarding licences and landing rights (62 per cent).
The US Treasury Department's Office of Foreign Assets Control (OFAC) has already imposed a record $1.3 billion in penalties this year across a range of industries.
The survey also showed 72 per cent of organisations find the changing regulatory paradigms in the regions they do business challenging. However, 78 per cent listed automation as a high priority when considering a screening solution.
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 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.'
Acuity senior director David Loser believes that cargo operators 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.'
Mr Loser said that one element of the survey that surprised him was that companies saw the benefits compliance could bring as well as the risks of failing to comply.
The survey showed that 34 per cent of respondents said that one of the key business drivers to improve trade sanction and risk compliance was the rejection of profitable business.
'A lot of the drivers in the regulatory space are around fines and negative reputation, which was still a concern for 80 per cent of the respondents, but the other side is that companies felt they may be missing out on some operational improvements or profitable business opportunities.'
The survey also revealed some of the challenges that air cargo carriers and freight forwarders face when trying to achieve comprehensive sanctions compliance: keeping up with changing regulatory paradigms in the regions they do business (72 per cent); the rising cost of compliance (70 per cent); and repeated checks and manual processes (61 per cent).
'Exacerbating these challenges,' said Acuity, is that 73 per cent 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.'
However, 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 per cent listed automation as a high priority when considering a screening solution, with 70 per cent prioritising a single system to streamline compliance checks,' said Acuity.