Compliance shift demands transaction screening

Robert Soban, director of Maritime Risk & Compliance at the maritime intelligence platform, said the compliance gap facing banks is no longer about identifying risky customers but demonstrating that every individual transaction has been assessed and documented.

While many trade finance teams screen goods during the onboarding process, regulators are increasingly demanding transaction-level due diligence supported by timestamped audit trails. Failure to provide evidence that checks were carried out could expose firms to regulatory fines, asset freezes and the loss of correspondent banking relationships.

“The process gap between what compliance teams do and what authorities now expect is widening, and it is being measured in timestamped audit trails, not intentions,” said Soban.

The challenge is particularly acute for dual-use goods, everyday products such as pumps, sensors and chemicals that have legitimate civilian applications but can also be used for military or weapons programmes. Bills of lading often contain only generic descriptions, making manual screening against more than 25 international export control lists both difficult and time-consuming.

According to Pole Star Global, regulators including the UK’s Prudential Regulation Authority, Financial Conduct Authority, the US Office of Foreign Assets Control and EU authorities now expect firms to demonstrate that due diligence has been carried out on every relevant shipment, rather than relying solely on checks completed when a customer relationship began.

“The question regulators are now asking is not whether a firm has a dual-use goods policy,” continued Soban. “It is whether that policy produced a documented, reviewable action for every relevant transaction.”

He added that technology capable of automatically screening Bills of Lading, vessel movements and regulatory lists can provide the evidence compliance teams increasingly need.

“The regulatory bar for dual-use goods screening is not, in the end, a classification problem,” Soban said. “It is a documentation problem. Authorities want evidence that the check happened consistently, at the transaction level, for every bill of lading.”