"For example, what procedures have you established blocking payments or contracts to individuals and vendors that appear on the List of Designated Nationals and Blocked Persons?"
Compliance with U.S. government regulations with regard to terrorist and other specially designated entities is an important topic about which few in payables are sufficiently aware. See the TAPN report Steep Fines for the Unsuspecting; What You Need to Know About OFAC.
When setting up a vendor, it is a best practice to require a Form W-8 or W-9, and to match the TIN to the IRS database (see TIN matching).
Organizations need get the SDN list from OFAC and run it against their vendor database. (Software is available for this.) Any apparent match should be investigated and associated transactions stopped and reported to the Office of Foreign Assets Control.
The SDN list is frequently updated by OFAC. The frequency with which you run the match check will depend on the nature of your business and the number of foreign entities with whom you do business. You can access the lists at the treasury department's OFAC Web site, where you can access the lists in a variety of electronic formats.