Supplier and customer compliance for ecommerce: what to check and what a mistake costs

Ecommerce lets a small team sell to the whole world. That reach is also a compliance risk. Orders arrive automatically from customers you never meet, marketplace sellers and suppliers join through online forms, and payments flow without anyone looking at the names behind them. Even the largest platforms have been penalised because automated systems missed what a human might have caught.

Why ecommerce is exposed

Automated orders. Checkout runs without human review, so screening has to be built into the process or it does not happen.

Global shipping. Selling internationally means some orders will come from, or be shipped to, sanctioned territories or listed persons.

Marketplaces and suppliers. Platforms onboard third-party sellers, developers and manufacturers. A supplier owned by a listed person, or one that is about to go insolvent, can create legal and operational problems.

Data quality. Customers type names and addresses freely. Alternative spellings, transliterations and abbreviations easily defeat simple screening rules.

What to check

Sanctions lists (EU, US, UK, UN)

Screen customers, marketplace sellers, suppliers and payees against the OFAC SDN and other OFAC lists, the EU consolidated list, the UK OFSI list and the UN list. Screen shipping and billing addresses for sanctioned territories, including regional variants and alternative spellings. Apply ownership rules to business suppliers and sellers.

Politically exposed persons (PEPs)

PEP screening matters most for B2B sellers, high-value buyers, marketplace sellers and suppliers in public procurement. It signals higher corruption and money laundering risk.

Insolvency

A key supplier or logistics partner in insolvency can stop deliveries overnight. Marketplace sellers in insolvency may leave refunds unpaid and customers unhappy.

Adverse media and legal proceedings

News of counterfeiting, fraud, product safety recalls or regulatory action against a supplier or seller is a warning sign worth acting on early.

Beneficial owners

Know who really owns your suppliers and larger marketplace sellers. Opaque ownership can hide listed persons or sellers who were previously removed from the platform.

Real cases: what a mistake cost

Amazon: USD 134,523 (OFAC, 2020)

In July 2020 OFAC announced a settlement of USD 134,523 with Amazon.com, Inc. for apparent violations of several sanctions programs. Amazon processed orders and provided services to persons in Crimea, Iran and Syria and to persons on the SDN list. OFAC noted that Amazon's automated screening failed to catch common alternative spellings of sanctioned places and orders addressed to embassies of sanctioned countries. The penalty was modest because the transaction value was small and Amazon disclosed voluntarily, but the case is a clear example of how automated systems can miss obvious variants.

Source: OFAC recent actions, 8 July 2020

Apple: USD 466,912 (OFAC, 2019)

In November 2019 OFAC announced a settlement of USD 466,912 with Apple Inc. for apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations. Between 2015 and 2017 Apple hosted, sold and facilitated the transfer of apps belonging to a Slovenian software company that was on the SDN list. Apple's screening missed the match because its records showed the company as "SIS DOO" while the SDN list read "SIS d.o.o.", a difference in how the corporate suffix was written.

Source: OFAC recent actions, 25 November 2019

Both cases involve supplier or customer screening at platform scale, and both failures came down to how names and addresses were matched.

Practical checklist

• Screen every customer order before shipping, including billing and shipping addresses.
• Screen marketplace sellers, developers, suppliers and payees at onboarding.
• Re-screen your full customer and supplier base daily.
• Use fuzzy matching that handles alternative spellings, transliterations and corporate suffixes.
• Block or review orders to sanctioned territories, including regional names and embassies.
• Record beneficial owners of suppliers and larger sellers.
• Monitor insolvency of critical suppliers and logistics partners.
• Track adverse media on suppliers for counterfeiting, fraud and safety issues.
• Keep logs of every screening result and manual decision.
• Test your screening regularly with known listed names and variants.

How to automate it

Online businesses already automate checkout, payments and shipping. Compliance should be automated too. Unicorn Intelligence runs automatic, daily compliance checks on all your customers and suppliers: sanctions, PEPs, insolvency, adverse media and proceedings, and beneficial owners, with alerts delivered straight into your CRM.

The test is free, and new accounts also get 50 $ of credit.

Informative content: decisions and legal obligations remain yours.