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KYS KNOWLEDGE

KYS FOR INDUSTRY AND EXPORT COMPANIES

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SIMPLE AND UNDERSTANDABLE KYS AND SANCTIONS LIST VERIFICATION SYSTEM FOR YOUR COMPLIANCE PROCESSES

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WHY KYC / KYS IS IMPORTANT FOR THE INDUSTRY

The reach and influence of compliance in companies is becoming ever stronger.

The relevance of compliance for industry and export companies is becoming increasingly greater

The reach and influence of compliance in companies is becoming ever stronger. Stricter regulations or new sanctions, which are particularly important for the export industry, are a recurring topic in compliance circles as well as in the media.

Avoid risky transactions with Entity Due Diligence

Can you remember a risky business where you had previously collected too little information about your supplier and were suddenly confronted with conflicts that could have been avoided?These can be simple conflicts of interest, cases of bribery, embezzlement, violations of existing sanctions or embargos or other legal violations. The consequences for companies from such information gaps can be far-reaching. Be that direct financial damage, damage to reputation, fines or criminal penalties.

KYS and export controls are not only the task of Supply Chain Management

Industrial and commercial companies in various industries such as technology, chemicals or luxury compliance processes implement compliance processes in which the procedure and scope of KYS screenings as well as export controls are defined. The role model of a compliance process is not only a matter of Supply Chain Management (SCM), but also of the top management level in the company, since due diligence has an influence on many other business areas. Compliance in export control extends from purchasing to sales, from HR to visitor management, because it is important to know your suppliers, customers, employees and visitors (Screen your Employees and Visitors).

Do you already know your business partners before they start working together?

By reviewing your suppliers, customers, employees and visitors, you can reduce your risks, detect and prevent misuse. Compliance managers can learn more about the use and final recipient of a shipment before they close a deal. If doubts  or inconsistencies arise, we usually review the (future) cooperation in depth.By reviewing your suppliers, customers, employees and visitors, you can reduce your risks, detect and prevent misuse. Those responsible for compliance inform themselves in detail about the use and the final recipient of the delivery even before the conclusion of a transaction. If there are doubts (for example, one of the following Red Flags) or discrepancies, we usually examine the (future) cooperation in depth.

Find out more about Know Your Supplier, sanction list screenings, embargoes and export controls and compliance in the industry sector below and download our Digital KYS Summary for Industry Compliance Managers for free:

Download Digital KYS Summary

What is KYS?

KYS stands for "Know Your Supplier" and is a comprehensive process in which you gather as much information as possible about your (potential) suppliers and business partners in order to make an informed decision for your cooperation.

KYS stands for "Know Your Supplier" and is a comprehensive process in which you gather as much information as possible about your (potential) suppliers and business partners in order to make an informed decision for your cooperation.

KYS (also KYC: "Know Your Customer" or "Know Your Client") is an important compliance process to minimize your company's reputational risks and to ensure that you do not do business with legal or natural persons who are acting unlawfully and therefore pose a risk to your company.

Why a Due Diligence Report for Supplier Monitoring (KYS)?

Know Your Supplier reports can also be referred to as due diligence reports and include the verification of compliance relevant data about your potential suppliers.

Due diligence reports include the review of compliance relevant data about your potential suppliers. Getting involved with the wrong supplier or business partner can jeopardize your business - both in terms of reputational risks and legal and regulatory requirements. It is therefore a sensible measure to obtain the necessary information about your business relationships in order to be able to make an informed and fact-based decision about your business activities.

What is the difference between sanctions and embargoes?

Sanctions and embargoes are both imposed against countries or governments.

Sanctions and embargoes can be imposed against countries or governments. However, sanctions may also be imposed against certain persons, companies or organisations, such as measures against persons and organisations with links to criminal organisations (SECO). Embargoes and sanctions both aim to impose targeted measures such as trade restrictions on a state for as long as necessary until, for example, the required human rights are respected or the political situation has stabilised.

The embargoes relate to punitive measures in the area of import and export. However, sanctions may also include other types of penalties outside import or export, such as preventing business activity with a sanctioned company. Accordingly, all embargoes are a form of sanction, but not every sanction is also an embargo.

What is the difference between export controls and sanctions?

Export controls relate to goods, software and technology, while sanctions relate to countries, individuals, companies, organisations and goods.

Export controls relate to goods, software and technology, while sanctions relate to countries, individuals, companies and organisations. The review of business relationships for sanctions is part of the Simplified Due Diligence, which in turn is part of export control.

Why are business partners checked for sanctions?

By checking your business contacts, you ensure that you are not doing business with persons or companies on the sanctions list.

By checking your business contacts, you ensure that no business is transacted with persons or organisations on the sanctions list. In everyday life, KYS means for every company that they compare and check all their business contacts with these sanction lists and embargo lists.
Be this

  • when entering a new customer or concluding a new supplier relationship
  • before the conclusion of the sale or dispatch of your goods
  • before any higher financial transaction - especially in the case of large cash amounts

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Which tools do I use to conduct a sanction check, i.e. a sanction list screening?

There are various sources of sanctions lists.

There are various sources of sanctions lists. These are usually issued and updated by organisations or authorities such as OPEC (Organisation of Petroleum Exporting Countries), OFAC (Office of Foreign Assets Control), the UNO, EU or similar organisations. In Switzerland, SECO makes the list of sanctions available on its website. You can therefore compare your entities with the sanctions lists from public databases or with the public media. With Digital Compliance solutions such as the KYC Toolbox, you can check your entities with an enriched compliance database on various sanctions lists, as well as blacklists, watchlists, PEP, embargo or CRIME lists.

 

Here you can see which sanction lists are covered by the KYC Toolbox

Your KYS review process is usually performed in your Internal Compliance Program (ICP).

What are the most important international lists of sanctions and embargoes?

Many databases use the following sanction and embargo lists for a smart sanction list screening

Many databases use the following sanction and embargo lists for a smart sanction list screening:

  • OFAC Sanctions (USA)
  • UNO Sanctions (UN)
  • SECO Sanctions (CHE)
  • EC Sanctions (EU)
  • UNO embargoes (UN)
  • DFAT Sanctions (CAN)
  • METI Sanctions (JPN)
  • HM Sanctions and Embargoes (GBR)

Here you can open an overview of the sanction, embargo, CRIME and terror lists available in our KYC database for screenings.

Which indicators (red flags) indicate a potentially risky business?

Risky transactions often manifest themselves even before the contract is concluded in the form of the business partner's behaviour, specific requirements or special conditions. As part of your compliance process, companies define which indicators could arise for their business that would indicate an increased risk. Such "red flags" in negotiations with a new supplier or customer could be, for example: 
 
- Your customer or supplier requires unusual payment methods (e.g. cash payment of large amounts). 
- Your business partner is active in a politically exposed position (PEP) or in the military sector. 
- The person hesitates to provide information about the purpose or origin of the goods. 
- The ordered goods are to be delivered to a company headquarters in a crisis country or on an unusual shipping route. 
- The person orders goods that are unrelated to the company's business activities or an unusually large quantity. 
- The goods ordered do not meet the technological standards of the recipient country or customer. 
Risky transactions often manifest themselves even before the contract is concluded in the form of the business partner's behaviour, specific requirements or special conditions. As part of your compliance process, companies define which indicators could occur for their business that could lead to an increased risk. Such "red flags" when negotiating with a new supplier or customer can be for example:
 
  • Your customer or supplier requires unusual payment methods (e.g. cash payment of large amounts).
  • Your business partner is active in a politically exposed position (PEP) or in the military sector.
  • The person is reluctant to provide information on the purpose or origin of the goods.
  • The ordered goods are to be delivered to a company headquarters in a crisis country or on an unusual shipping route.

You can read more about risk indicators in SECO's Red Flags Check List or in the leaflet of BAFA (Bundesamt für Wirtschaft und Ausfuhrkontrolle Deutschland).

What is an Internal Compliance Program (ICP)?

An ICP (Internal Compliance Program) is an internal control program designed to ensure compliance with export control regulations.

An ICP (Internal Compliance Program) is an internal control program designed to ensure compliance with export control regulations. The Executive Board is committed to take organisational measures and precautions with the aim of avoiding infringements from the outset.

Which goods usually require special export or import permits?

The import and export of certain goods are subject to various conditions due to provisions on noncustoms enactments.

The import and export of certain goods are subject to various conditions due to provisions on noncustoms enactments. In general, goods for import or export from Switzerland require a permit for the following reasons:

  • Protection of public security (weapons, ammunition and dual use goods)
  • Protection of industrial rights (precious metals, transfer of cultural property)
  • Protection of the environment (chemicals and pesticides, waste)
  • Protection of health (medicines and doping, narcotics, foodstuffs)
  • Protection of fauna and flora (animals and animal products, species protection (CITES))
  • Economic and agricultural measures (tariff quotas)

Details on the Swiss permit requirement can be found from the Federal Customs Administration (FCA).

What are Dual Use Goods?

Dual-use goods are goods, knowledge or software which can be used for both civil and military purposes due to their "dual purpose".

Dual-use goods are goods, knowledge or software which, due to their dual purpose, can be used for both civil and military purposes. SECO offers further information on such dual-use goods.

What Swiss legislation is related to KYS and export control for industrial companies?

In Switzerland, you can comply with the following laws and regulations in your compliance and export control processes

In Switzerland, according to the SPEDLOGSWISS Risk Bulletin or an extract from the Embassy to the Federal Act on the Enforcement of International Sanctions in Your Compliance and Export Control Processes, the following laws and regulations apply to you:

  • Embargo Act (EmbG)
    For reasons of security policy, the Swiss government may impose sanctions based on the Embargo Act in the form of import, export and transit bans on goods from or to certain countries.

  • War Material Act (KMG) and War Material Ordinance (KMV)
    Control the production and transfer of war material and technology in order to fulfil Switzerland's international obligations and to uphold its foreign policy principles.

  • Goods Control Act (GKG) and Goods Control Ordinance (GKV)
    Control of military goods, dual use goods and other goods subject to authorisation.

This is not an exhaustive list of the laws and regulations to be observed. In addition to Swiss legislation, international guidelines such as the US EAR/ITAR for companies must also be observed.

Read here why the export control laws of the USA are also relevant for Swiss companies and why the regulations for military equipment of the US-American International Traffic in Arms Regulations (ITAR) also have a high priority in the area of export control and compliance in Europe.

 

 

KYC Spider is not a financial intermediary and is not subject to the requirements of the MLA. KYC Spider has developed an information platform to support financial intermediaries in fulfilling their due diligence obligations. KYC Spider is a technical service provider for data and document management.

KYC Spider does not provide legal, regulatory, economic, financial, tax, organizational, technical or other advice.

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