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

Logistics companies sit in the middle of almost every international transaction. A freight forwarder, carrier or 3PL touches shippers, consignees, notify parties, agents, subcontracted hauliers and payment intermediaries, often across dozens of countries in a single week. Each of those parties is a potential compliance exposure, and regulators have made it clear that "we only moved the box" is not a defence.

Why logistics is exposed

Three features make the sector a frequent target of sanctions enforcement.

Many counterparties, little contact. A single shipment can involve five or more parties, most of them known only by a name and an address on a booking. Agents in transit countries change frequently, and the real buyer is often hidden behind a trading company.

High volume, low margin. Operations teams are measured on speed. Manual checks on every booking feel impossible, so screening is either skipped or done once at onboarding and never repeated.

Payments in US dollars. Freight invoices are commonly issued in USD. That alone can bring a non-US company within reach of US sanctions, because the payment clears through the US financial system.

Fragmented systems. Mergers leave logistics groups with many booking, invoicing and payment platforms. A name blocked in one system can pass straight through another.

What to check

A sound screening programme for a logistics business covers the following areas, for customers, suppliers, agents and, where possible, consignees and notify parties.

Sanctions lists (EU, US, UK, UN)

Screen every party against the main consolidated lists: the US OFAC SDN list and other OFAC lists, the EU consolidated financial sanctions list, the UK OFSI consolidated list, and the UN Security Council list. Check ownership too: under both US and EU rules, a company owned 50% or more by a listed person can be treated as blocked even if its own name is not on any list. Destination matters as much as names, so flag shipments to or through comprehensively sanctioned territories.

Politically exposed persons (PEPs)

State-linked importers, port operators and customs brokers can be owned or run by politically exposed persons. A PEP is not prohibited, but the relationship carries a higher bribery and corruption risk and justifies enhanced due diligence.

Insolvency

A carrier or subcontractor that becomes insolvent can leave cargo stranded in a port and you liable to your customer. A customer in insolvency proceedings may never pay the freight. Insolvency registers and court notices should be monitored, not checked once.

Adverse media and legal proceedings

News of smuggling, fraud, customs violations or export control cases often appears long before a name reaches a sanctions list. Court proceedings involving a counterparty are an early warning signal.

Beneficial owners

Identify the natural persons who ultimately own or control each counterparty. Front companies used to evade sanctions typically have recent incorporation dates, nominee directors and owners in high-risk jurisdictions.

Real cases: what a mistake cost

Toll Holdings: USD 6,131,855 (OFAC, 2022)

In April 2022 the US Treasury's Office of Foreign Assets Control (OFAC) announced a settlement of USD 6,131,855 with Toll Holdings Limited, an Australian freight forwarding and logistics company. OFAC found 2,958 apparent violations between 2013 and 2019: Toll received or made payments through the US financial system connected to shipments involving North Korea, Iran, Syria or blocked persons. The case was notable because Toll is not a US company. Issuing invoices in US dollars was enough to cause US banks to process prohibited payments. OFAC highlighted weak screening across Toll's many separate systems.

Source: OFAC recent actions, 25 April 2022

DHL: USD 9,444,744 (OFAC and BIS, 2009)

In August 2009 DPWN Holdings (USA) and DHL Express (USA) agreed to pay USD 9,444,744 to settle allegations brought by OFAC and the US Commerce Department's Bureau of Industry and Security (BIS). OFAC alleged that between 2002 and 2007 DHL made shipments to Iran and Sudan in violation of US sanctions, and BIS alleged recordkeeping failures on export shipments to Syria. DHL did not voluntarily disclose the conduct and agreed to external compliance audits as part of the settlement.

Source: US Treasury press release tg259

The lesson from both cases is the same: the penalty followed from gaps in routine screening, not from a single deliberate deal.

Practical checklist

• Screen every new customer, supplier, agent and subcontractor before the first booking.
• Screen consignees and notify parties on each shipment, not only the contracting customer.
• Re-screen your whole counterparty base every day, because lists change daily.
• Apply the 50% ownership rule and record the beneficial owners of each counterparty.
• Flag routings to or through sanctioned territories and unusual transshipment points.
• Check for alternative spellings and transliterations of names and addresses.
• Monitor insolvency registers for carriers and key customers.
• Watch adverse media and court proceedings for smuggling, fraud and customs cases.
• Make sure screening covers every booking, invoicing and payment system in the group.
• Keep an audit trail of every check, match and decision.

How to automate it

Doing all of this by hand across thousands of counterparties is not realistic. 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.