When simple screening is not enough

During a low level IntegraCheck® | Integrity Due Diligence background check on targets in Central America, we identified an allegation on social media that the company’s low profile shareholder had 50% ownership in a company that was listed on the OFAC List of Specially Designated Nationals and Blocked Persons (SDN List) for its dealings with sanctioned entities in the Middle East. Despite repeated checks in various screening databases, we found no information suggesting that the shareholder had 50% stake in a sanctioned entity. Acting on our report, our U.S. Client requested us to ascertain these concerns and investigate further.

After discussions with the Client, where we explained that many databases do not take into account the OFAC 50% rule and are not comprehensive enough to track cumulative ownership of entities by sanctioned individuals, we began work on enhanced high-level due diligence.

Our Research & Analysis teams in America and Middle East explained that there are private entities and Special Purpose Vehicles that may not need to declare ownership percentages, thus our enhanced due diligence included: multiple database screening, registry checks and multiple language media research through proprietary, online and subscribed sources.

After extensive research, our Research & Analysis teams confirmed that the shareholder had 73% shares in a sanctioned entity and was also connected to another entity on the SDN List, where his family company in East Asia had been investigated for sanction breaches two years earlier.

We demonstrated to the Client that running checks on a screening database is a small crucial element of baseline KYC and due diligence, but in-depth analysis and research, amongst several other factors, need to be considered to ensure thoroughness and accuracy. During the third-party risk assessments, our team provided further local insight so that the Client understood how different risks can become accentuated or hidden depending local and regional differences.  

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