Navigating New Compliance Challenges: Insights for Compliance Teams Following DHS's Latest UFLPA Entity List Update

On May 16 2024, the Department of Homeland Security (DHS) made a significant announcement, adding 26 additional PRC-based textile companies to the Uyghur Forced Labor Prevention Act (UFLPA) Entity List. This development underscores the increasing regulatory scrutiny on supply chains and the need for strong and agile compliance frameworks. For compliance teams, particularly in industries like apparel manufacturing and retail, this update necessitates immediate attention and action.

UFLPA Entity List Update: Key Considerations for Compliance Teams

Some immediate priorities for compliance and risk teams in light of the announcement will include:

1. Immediate Supply Chain Audit

With the addition of these 26 new companies to the UFLPA Entity List, compliance teams should conduct an urgent audit of their supply chains. Identifying any direct or indirect links to the newly listed entities is critical. This involves scrutinizing supplier relationships, contracts, and procurement processes to ensure you are not doing business with these entities. Additionally, it is important to understand the corporate ownership structures and ultimate beneficial ownership of your suppliers to confirm there are no hidden ties to these listed companies.

2. Enhanced Due Diligence

The announcement highlights the importance of ongoing due diligence and continuous monitoring. Compliance teams should strengthen their due diligence processes to include more rigorous checks on suppliers and subcontractors. This includes leveraging third-party audits and utilizing technology to screen the existing supplier ecosystem to surface any hidden connections to sanctioned entities.

3. Updating Compliance Policies

Organizations should ensure their compliance policies reflect UFLPA requirements and updates. This may mean revising supplier codes of conduct, integrating UFLPA compliance clauses in contracts, and ensuring that all stakeholders are aware of and adhere to the updated policies. Training programs should be implemented to educate employees and suppliers on the implications of the UFLPA and the importance of compliance.

As well as these immediate actions to take, compliance teams and the businesses they serve should also make sure they have the following strategic priorities:

4. Technology and Data Management

Leveraging technology can significantly enhance compliance efforts, especially in an environment of rapid regulatory change. Utilizing compliance management software to track and manage supplier data, automate due diligence processes, and monitor compliance in real time is critical. Effective data integration into workflow management ensures that compliance teams have access to accurate and up-to-date information, facilitating quick decision-making, risk mitigation, and documentation.

5. Risk Mitigation Strategies

Developing and implementing risk mitigation strategies is also important. This may include diversifying the supplier base to reduce dependency on high-risk regions, engaging with alternative suppliers, and investing in local or regional production capabilities. These kinds of strategies not only enhance compliance but also strengthen the resilience and sustainability of the supply chain.

6. Collaboration and Communication

Effective compliance requires collaboration across various departments, including procurement, legal, and operations. Establishing clear communication channels and fostering a culture of compliance within the organization is vital.

7. Robust reporting and audit trails

Compliance teams must be able to demonstrate their compliance posture regarding regulations like the Uyghur Forced Labor Prevention Act (UFLPA) to senior management and regulators. Reporting on this should be streamlined and efficient, and not rely on teams having to spend days manually compiling the data.

How GAN Integrity can help compliance with the Uyghur Forced Labor Prevention Act (UFLPA)

GAN Integrity and Sayari recently joined forces to help compliance and risk teams combat corruption and modern slavery in supply chains and remain compliant with regulations like the UFLPA.

“Compliance expectations are extending beyond the ‘four walls’ of the company and into the extended enterprise,” said Benjamin Power, Sayari COO. “By integrating Sayari’s in-depth analysis of corporate ownership structures and more than 2 billion pre-computed relationships and risk factors into third-party screening and monitoring processes, our joint solution with GAN Integrity enables compliance, risk, and procurement teams to seamlessly assess an increasingly complex network of suppliers, contractors, and subcontractors.” With the joint solution, teams can map beneficial ownership and supply chain relationships, screen for risk — from forced labor to political exposure — and implement workflows to identify, mitigate, and monitor risks throughout the relationship lifecycle.

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