The Importance of Screening Vendors

August 9, 2022

The list of your third-party vendors will expand as your company expands. This also means the associated risks – non-compliance, regulatory, contractual, process, and more –  with these vendors may also increase. This is where the need for a robust vendor screening solution comes in. Read on to understand the different areas of screening vendors and navigate the best practices to screen your company’s potential vendors. 

Different Types of Screening 


Many losses come riding with contracts with vendors who don’t have good financial health. When a vendor doesn’t have their financial issues sorted, you end up dealing with unforeseen business closures, late payments, and late deliveries that can cripple your business. 

A thorough financial screening enables you to run the right due diligence regarding where exactly the finances of your potential vendors stand. This, in turn, ensures maximum compliance, lowers risks, and harnesses partnerships that are mutually lucrative. 

The result? An absolute absence of expensive compliance roadblocks and a prosperous financial standing enjoyed by both parties. 


Comprehensive legal screening is a critical first step in understanding and partnering with potential vendors. It ensures you remain in federal compliance, detect and mitigate any illegal actions, keep your finances in order, and don’t end up in a pool of liabilities. 

A legal screening uncovers several legal slippery slopes a vendor might be dealing with. A few of these include detecting any cases of federal non-compliance, analyzing several years worth of federal, state, and local tax liens, and going through the vendor’s history of bankruptcy filings. 

An unstable vendor can trigger several disasters within a company. Findings from a legal screening help avert any problem before it takes form. 

Health, Safety & Environmental (HSE) Compliance

For just about any company, investing in a robust Environment, Health & Safety (HSE) program is equivalent to opening the doors to future employee well-being.

Through an HSE screening, you can ensure your potential vendors remain in compliance with:

Working with vendors who do not remain in compliance with these regulations can hinder the growth of a business that aims to be sustainable and compliant. 

Before sealing the deal with any vendor, it’s critical for your business to know if the vendor has a history that might invite any risks of non-compliance or other issues at your company’s threshold. For instance, your potential vendor might still be dealing with past legal actions or operating under a different company name to avoid disclosing any issues from the past. Regardless of what they might be concealing, background research can uncover their history through targeted due diligence. This can help reveal any issues related to:

  • Criminal convictions
  • Bankruptcy
  • Corporate record verification
  • Regulatory violations
  • Civil litigations
  • Social media
  • Government sanctions
  • Federal and state debarment matches
  • Pending judgments and liens 


From identity theft to money laundering to several breaches of ethics – a potential vendor might choose to conceal several regulatory violations.

Businesses that make payments or receive federal funding must include a provision in their compliance policies that ensures they do not end up partnering with restricted entities or individuals that appear on the OFAC (Office of Foreign Assets Control) list. For instance, based on your industry, federal laws might require you to screen every contractor, vendor, or employee’s debarment status against various exclusion databases. A few of the many of these databases include:

  • Designated Nationals List (SDN)
  • General Services Administration’s (GSA) Excluded Parties List System (EPLS)
  • Office of Inspector General’s (OIG) List of Excluded Individuals/Entities (LEIE)
  • Office of Foreign Asset Control (OFAC) 
  • Bureau of Industry & Security (BIS) Denied Persons List (DPL) and Entity List

What Aspects to Screen? 


Screening the aspect of accessibility helps you answer critical questions like – “Is it easy to contact my vendors and can they respond in a timely manner?” “How close are my vendors placed to my company’s rental properties?” “Do they offer emergency solutions or 24/7 services?”


This ensures both your vendor’s and your business’s professional licenses stay up-to-date. Check whether your vendors have licenses required by different cities, counties, or states. Make sure you avoid any unlicensed vendor. 


It is critical for a potential vendor to have appropriate insurance should any liability claims, damages, or injuries arise down the line. 


Experience is key to fostering productive partnerships with a vendor. Ask yourself: “Have my vendors been in business long enough?” “Do they have any referrals or testimonials that can attest to their interpersonal skills and the quality of work they deliver?”


Make sure your vendors screen their employees or any contractors they might send to your company properties. A landlord or a property manager might end up responsible if the contractor a vendor sends is irresponsible, dangerous, or cause harm to the property, tenet, or even themselves. This can directly reflect on your business operations. 

Criminal Records

Screening for criminal records can help detect if a vendor employs the “right” individuals – those who come with the appropriate background and possess the licensing and legal work authorization to work legally as contractors or subcontractors with your company. 

This screening can cover areas like criminal history, drug testing, employment verifications, driver records, credentialing, employment exclusions, and debarments. 

Bankruptcy Cases

When striking a partnership with a vendor, companies must consider the possibility of ending up in a situation where the vendor may file for bankruptcy. 

Regulatory Violations

It’s critical to discover if a potential vendor has a history of any regulatory violations. If a vendor is not serious about compliance, it can hurt your company’s products and services. In addition, issues of non-compliance from the vendor’s side can drag your business into several expensive legal roadblocks down the line. 

Do You Know Who You’re Working With?

When partnering with third-party contractors or subcontractors, screening vendors can substantially lower your liabilities.

Based on the industry your business operates in, every partnership with a potential vendor needs EHS screening, OFAC debarment screening, legal screening, financial screening, and other types of sanction screening. Regardless of how attentive your company is to several arenas of compliance, it is critical that your vendors stay on the same page. 

Reach out to ComplianceLine to determine “who” you’re really working with to foster healthy vendor relationships and put an end to any risk of non-compliance.