Small and large companies alike are becoming more vulnerable to fines, reputational damage and, possibly, jail time for their officers for doing business with known terrorists and identity thieves. The newest compliance development in the U.S. is the Federal Trade Commission’s “Red Flag” program, which will be aimed at identifying terrorists, ID thieves and money launderers. This new regulation will go into effect November 1, 2008.

A recent Dark Reading article notes small companies that feel they are not at risk are actually being targeted the most because smarter criminals realize that they may fly under the radar with “mom-and-pop” businesses. While this new regulation aims to close off this channel, larger businesses already performing due diligence screening will also benefit from taking it into account, as it may require new levels of scrutiny and new lists to screen against. Financial institutions, banks and companies that are currently using interdiction software will have a fairly easy transition complying with the new “Red Flag” program. Other U.S. businesses may be wise to create a due diligence program in advance of it to ensure compliance in an increasingly regulated market.

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A recent USA Today story reveals a disturbing fact: Nelson Mandela and other members of the African National Congress (ANC) are still on the U.S. government’s “no fly list.” While Mandela and his associates do not appear on any sanctions list, the fact that their names come up on a travel restriction list does highlight the challenges of using lists that are not properly maintained by authorities.

You must recognize that the listings are sometimes going to be out-of-date and/or incomplete. For example, OFAC’s records for Abu Zubaydah (in U.S. custody) and Abu Musab Al-Zarqawi (killed in Iraq in 2006) would certainly be more useful to companies performing screening if they were updated. However, the Mandela case notwithstanding, the existing listings do represent people for whom you should be screening. The best advice is to properly research each match that's potentially legitimate and institute special procedures to exclude the matches for each exception. Or, better still, create rules within your filtering system so that such exceptions are automatically managed thus saving time and resources going forward.