OFAC
Compliance-Internal Compliance
Program
SCCE 6
thAnnual Institute
10 September 2007
Who is OFAC?
The Office of Foreign Assets Control (OFAC) of the Department of the Treasury
Administers U.S. economic sanctions programs, which prohibit dealing, in whole or in part, with nations currently disfavored by the U.S.
Government.
Comprehensive sanctions programs against Cuba, Iran, Iraq, Libya, and Sudan as well as more limited sanctions against Angola, Burma, Liberia
Specially Designed Nationals and
Blocked Persons List
Contains names of countries, organizations, and individuals with which U.S. interests are
precluded from conducting business and whose U.S. assets have been frozen.
Regularly updated and should be cross-checked against the company’s transactions.
Available at www.ustreas.gov/offices/eotffc/ofac.
Also known as the SDN list.
OFAC Compliance
Compliance with OFAC regulations requires:
– 1) checking the names of new customers or parties to a new transaction against the existing SDN list and
– 2) screening an existing customer or counterparty database against updates to the list.
All matches, or "hits", must be investigated and cleared before a transaction can be completed and before reporting to OFAC. Contact OFAC's Compliance “Hotline" at 1-800-540-6322 for verification or for in-process wire transfers:
Blocked vs. Prohibited Transactions
Blocked Transactions
– Required when property is located in U.S., held by U.S.
individuals or entities, or comes into the possession or control of U.S. individuals or entities.
– Funds must be placed into an interest-bearing account on your books from which only OFAC-authorized debits may be made. The blocking also must be reported to OFAC Compliance within 10 business days.
Prohibited Transactions
– Underlying transaction may be prohibited, but there is no blockable interest in the transaction. Transaction is simply rejected, i.e., not processed.
OFAC Reporting
1. Any transaction that has been blocked or rejected must be reported to OFAC within ten
business days from the date the property became blocked
2. Annual report of all property blocked as of June 30 is due by September 30 of each year
3. OFAC requires the retention of all reports and
Who must comply with OFAC?
ALLU.S. companies, U.S. citizens and permanent
resident aliens who are employees, officers, or directors of U.S. domiciled companies, including overseas branches, need to be aware that they may be held accountable for sanctions violations
pursuant to OFAC.
This includes ALL U.S. insurance companies and financial institutions must monitor all financial transactions performed by or through them to detect those that involve any entity or person subject to the OFAC laws and regulations.
Consequences of Non-Compliance
Penalties vary according to the Program violated, but can include:
– Corporate and/or personal implications – Cautionary warnings
– Civil penalties of up to $1M or more – Imprisonment
Sanctions and settlements are posted to OFAC’s web site.
Non-Compliance-Penalty Assessment Factors
Aggravating Factors
– Willfulness
– Lack of Compliance Program
– Failure to take appropriate remedial action
Mitigating Factors
– Self-discovery and self-reporting of violation(s) – Existence of a compliance program
OFAC COMPLIANCE PROGRAM
Four key factors for effective Internal
Compliance Program (ICP)
– Develop and implement written policies and procedures.
– Conduct training.
– Design and maintain effective screening programs.
OFAC Compliance Program- Written
Policies and Procedures
– Policy Statement identifying the objective of the Internal Compliance Program.
– Identify Trade Sanction Compliance Officer who is responsible for oversight of the ICP.
– List consequences for non-compliance.
– Detail policies, procedures, and processes for handling items that are valid blocked or rejected items under the various sanctions programs.
– Identify the OFAC Hotline Number
OFAC Compliance Program
Education and Training
– Train all employees “at risk” for exposure to OFAC violations
– Train according to risk propensity assessed – Communicate method and frequency of training – Awareness training for all employees
OFAC Compliance Program-Effective
Screening
Software not mandatory, but highly recommended since SDN list changes routinely.
Interdict software searches transactions for names that match names on the SDN and other trade sanction lists and alerts of any matches that will require further research by the Company.
Some software even prepares documents needed for
meeting OFAC reporting and record-keeping requirements. Decision to use interdiction software and the degree of sensitivity of that software should be based on assessment of organizational risk and volume of transactions.
OFAC Compliance
Program-Independent Testing (Audits)
Regularly performed by the internal audit
department, outside auditors, consultants, or other qualified independent parties.
Objective, comprehensive evaluation of the adequacy of OFAC policies, procedures, and processes.
Identify potential violations and self-report as soon as possible.
FREQUENTLY ASKED
QUESTIONS
FAQ- Are there exceptions to the
prohibitions?
Yes. OFAC regulations often provide general
licenses authorizing the performance of
certain categories of transactions. OFAC
also issues specific licenses on a
case-by-case basis under certain limited situations
and conditions.
FAQ- How should past violations be
handled
?
Companies are encouraged to voluntarily
disclose past violations.
There is no amnesty period; however,
self-disclosure is considered a mitigating factor
by OFAC in civil penalty proceedings.
FAQ- How can we get permission to
transact with an embargoed country?
In some situations, authority to engage in certain transactions is provided by means of a general license. In instances where a general license does not exist, a written request for a specific license must be filed with OFAC. The request must conform to the procedures set out in the regulations pertaining to the particular sanctions program.
Questions???
Toll Free Hotline1-800-540-6322
Local Hotline1-202-622-2490
OFAC Licensing Division
(Direct)1-202-622-2480
Cuba Sanctions Violation Hotline
(Miami)1-786-845-2829
