Trade compliance software for airlines

Airlines handling millions of shipments every year have to negotiate a complex web of global security rules, to make sure the goods they transport do not fall foul of trade compliance regulators.

There have been a number of high profile cases involving illegal shipments of dual-use goods  -for either civilian or military application - for example between North Korea and Egypt, or military items to Russia.

A terror plot was foiled in July 2017, when ISIS attempted to fly partially-assembled bomb components from Turkey to Australia.

Money laundering is another hidden trap for carriers. In the US, the Office of Foreign Assets Control (OFAC) is very active checking for money laundering, while in Singapore there is the Monetary Authority of Singapore (MAS), with similar regulators in the European Union. 

Airlines are now turning to specialist software providers whose risk management systems can check the compliance of goods flowing through air cargo’s global supply chain.

Lufthansa Cargo is a long term user of Accuity’s trade compliance system to mitigate its risk against a background of emerging regulatory concerns around dual-use goods and sanctions compliance.

Although the shipper has a legal responsibility to carry out these checks, the German airline realised that it could not rely on this being done accurately.

Byron McKinney, trade finance product manager at London-based Accuity, part of the Reed Business Information, said: “Our offering is targeted at people who need to be able to manage risk and compliance and who do not want to go down the route of jeopardising their reputation.”

It is not just airlines looking to avoid unwittingly breaching sanctions, but also financial institutions, banks and corporates.

Said McKinney: “Those companies deal with large volumes of data. We offer them a product that allows them to manage their particular level of risk.”

In the case of airfreight, an air waybill (AWB) contains a great amount of detail, one key part of which will be the description of the commodity or goods.

Apart from the physical goods, there is also the “know your customer aspect” to the shipment: who are the consignor and the consignee, the freight forwarder and other parties to the transaction?

There has been a steady stream of financial penalties imposed by regulators from the early 2000s.

Said McKinney: “The regulators are not backing down, and are pushing forward with the amount of new rules that we see coming out, in terms of guidelines.”

Accuity has access to watchlists issued by the regulators which identify problematic companies or individuals, a database that is constantly updated and fed into the software.

Said McKinney: “Many of our clients process manual documents. It is very difficult for them to be able to manage those documents in any volume but their business requires them to do so.”

The Accuity system allows that paper-based content to be digitised and then the data screening can take place to check the shipper, where the shipment is going, and whether the consignee or consignor is known to work under a number of different aliases, to obscure their way of work.

Added McKinney: “We aim to make it easier for our customers to spot where those instances of trade based money laundering might actually be.”

The system also has an automated screening manager that allows the user to configure the amount of fields and tables that they need, based for example on who is the freight forwarder, the  shipper and the actual officer at that company and the goods.

Said McKinney: “All those pieces of information are easily adaptable into our screening tools.”

The screening manager also allows the user to decide on the amount of information they want to process per shipment and so mange their risk appetite.

“Then it is up to the organisation itself to do the due diligence beyond that. It can go to another level within the organisation to make those checks.

“Most of our customers want to reduce that level of matches that they come back with so that they get through the business they need to, but ensuring that they are compliant at the same time.”

The way that some potentially dual-use products are described on an AWB can vary, from highly detailed to extremely vague.

The European Union alone has a dual-use list of item definitions that stretches to more than 700 pages, with a very specific level detail on what is OK for civilian use.

As one simple example, the diameter of a steel pipe will indicate whether it is for military or civilian use.

There are nuances within the legislation and regulations which would require highly technical knowledge.

Said McKinney: “Our product deciphers the legislation so that we can automate it through algorithms. It looks at natural language and is able to recognise the different ways of describing things.”

So a vague product description will be flagged for further research, to make sure it is being used for the appropriate purposes.

Ball bearings, for example, can be in a flywheel but also in tank turrets.

“If you did not know this kind of stuff it would be very hard for you to pick it out and flag it, and that is the whole point of the product, those little nuances you get within money laundering and criminality around commodity shipments.

“It is not easy to pick out with naked eye and you need things like algorithms, robotics and new automation with Artificial Intelligence to pick them out and flag them as quickly as possible to the end user.”

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