30 Nov Avoiding the Men in Black
Vendor Information Collection and Validation
As she crossed the company parking lot early one morning, the director of shared services saw them. Men in black. Two of them. As she neared the building entrance, they approached and addressed her by name. She was afraid this day would come, and it finally had.
They flashed their federal credentials, and she welcomed them up to her office. They were there to talk about a payment she had authorized. As it turned out, the payee was on a sanctions list of the Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department, and the SSC director and her company were in trouble.
This really happened. So maybe you’ve heard of OFAC’s sanctions lists? The U.S. government has lists of individuals, organizations, and countries with whom it is illegal to do business, including narcotics traffickers, diamond smugglers, rogue regimes, terrorist organizations, et cetera. Various lists are aggregated and published, and transactions monitored by OFAC. If you run afoul of the list, it’s going to cost you. Banks, in their compliance, effectively screen payments for the government. They’ll find out if you slip. So what are you doing about it? Are you screening your supplier list?
The SSC director in this story, despite the payment but fortunately from a personal standpoint, had done something. She knew about the list and her responsibility, and so had initially refused to authorize payment. She warned her superiors that the payment to that particular entity was not allowed. They insisted she pay it, however. So she insisted on getting a signed letter from her CFO taking responsibility for it. When the day arrived bringing the men in black, she called her CFO to let him know the reckoning had come.
Civil penalties for 2017 as of this writing total $118 million (see the OFAC section of the Department of Treasury website). You can learn more about OFAC compliance from the Department of Treasury or at the AP & P2P Network, but it is pretty simple: Don’t pay an entity found on OFAC’s SDN aggregate list of blocked persons and parties or anyone in sanctioned countries. Check suppliers against the list to ensure they’re not on it. (And be prepared to explain the law to your management.)
That’s just one of the things you need to do before you set up a supplier in the vendor master file. There are a number of details to address and information to gather in setting up a new vendor. First, you want to verify that they are a legitimate supplier and not a fraudulent one of course, then, that they are an allowed supplier. Because once they’re in the master file, they can be paid. A well-maintained vendor master file is a core element of fraud prevention.
Of course, you also have to obtain a payee’s tax classification and a valid tax identification number (TIN) from them. The master file also includes remit-to information, physical address (have you checked that with the USPS for the correct format?) and bank routing and account information (have you tested that?).
You want to be sure you are gathering the information you need, and validating where it is either necessary (OFAC) or possible (IRS TIN match, USPS address correction). You also want to make it easy for yourself and for your suppliers. Third-party supplier portals, such as VendorInfo, can help with the things like the OFAC check, TIN matching, and address verification. Of course, supplier portals also facilitate communication with and information collection from your suppliers.
Getting the facts straight and properly recorded at the start of a new supplier relationship paves the way for a smoother payment process and a better supplier relationship. The devil is in the details, including in the process to ensure everything gets done. VendorInfo can help. If you want to avoid the men in black or any other unwelcome reception party, make sure your process includes checking the list, is thorough and is consistently followed.
To learn about vendor verification and compliance click here to request more information or call us at (678) 335-5735.