How to Maintain OFAC Compliance

When it comes to regulatory compliance, every business should know the Office of Foreign Assets Control (OFAC) and its sanctions.

Maintaining OFAC compliance is a critical part of any compliance strategy. To ensure compliance with OFAC, businesses should carefully review the list of sanctioned individuals, entities, and countries while keeping up with any changes.

However, staying up-to-date with OFAC regulations can be difficult.

This article will discuss the OFAC Sanctions List and outline tips for staying on top of OFAC compliance. Find out how you can protect your organization from potential penalties and fines and how Exiger can help you closely monitor changes to the OFAC Sanctions List.

What is the Office of Foreign Assets Control (OFAC)?

The Office of Foreign Assets Control (OFAC) is a U.S. Department of the Treasury division. OFAC administers and enforces economic and trade sanctions against targeted foreign countries and regimes, terrorists, narcotics traffickers, and other threats to national security, foreign policy, or the economy of the United States.

One of the critical responsibilities of OFAC is to maintain lists of sanctioned individuals and entities that are collectively known as the OFAC Sanctions List. In addition, OFAC also imposes broad country/jurisdiction sanctions on certain targeted foreign nations. OFAC’s sanctions programs are designed to disrupt these target’s financial support networks and protect national security and foreign relations.

U.S. companies as well as foreign companies need to be aware of this list and take steps to ensure they comply with OFAC sanctions.

OFAC Sanctions Lists and OFAC Sanctions Ownership and Control

The OFAC Sanctions List is a compilation of individuals, entities, and organizations sanctioned by the United States government. These trade and economic sanctions are typically imposed in response to human rights abuses, terrorism, and narcotics trafficking.

The OFAC’s country-level sanction span multiple geographic locations and includes countries like Cuba, Iran, and North Korea. Compliance with OFAC’s growing list of Russian sanctions is also important after the 2022 Russian invasion of Ukraine. 

Businesses should be aware of the OFAC Lists as it can impact their ability to do business with specific individuals, organizations, or countries. Regulators and law enforcement agencies have ramped up enforcement actions on non-compliance with U.S. law particularly involving financial services such as the Bank Secrecy Act/anti-money-laundering (AML).

Financial transactions with sanctioned parties may be subject to criminal and civil penalties. The U.S. government, specifically OFAC, treats non-compliance and apparent violations as a threat to national security and foreign relations.

The penalties for regulatory non-compliance can be severe, with fines ranging from several million dollars to several billion in addition to prison sentences lasting 30 years or more.

Stay on top of risk management of vendors, suppliers, and other third parties in your supply chain with Exiger’s supply chain risk management platform.

What is the OFAC Sanctions Ownership and Control?

OFAC Sanctions Ownership and Control refers to a sanctioned individual’s or entity’s legal and beneficial ownership structure. OFAC may consider any relevant factors when determining whether an entity is owned or controlled by a sanctioned individual or entity.

These factors may include, but are not limited to:

• Shareholders, directors, officers, senior management, and members of the sanctioned individual or entity
• The percentage of ownership held by the sanctioned individual or entity. OFAC’s 50 Percent Rule refers to the general guidance that an entity is considered owned or controlled by a sanctioned party if the sanctioned party owns 50 percent or more of the entity.
• The nature and extent of the relationship between the sanctioned individual or entity and the owner of the entity
• The location of the entity’s principal place of business

Businesses should regularly screen their ownership and control structure against the OFAC Sanctions Lists as part of sanctions compliance.

There are several methods businesses can use to screen for sanctioned parties. The most common way is to manually search the OFAC Sanctions Lists, which is regularly updated and found on the OFAC website.

However, this method can be time-consuming and may not be feasible for businesses with large customer or vendor databases.

Businesses can also use automated sanctions screening software to quickly and accurately screen for sanctioned parties. This type of software uses OFAC’s Sanctions Lists data to flag potential matches, which a compliance officer can review.

Exiger’s ScreenIQ offers sanctions screening and adverse media monitoring technology, making sanctions compliance easier for compliance teams worldwide.

For more information on OFAC compliance and Exiger screening capabilities, please contact us.

How to Maintain OFAC Sanctions Compliance

Ensuring your business complies with OFAC sanctions can be a daunting task. However, there are a few key things you can do to make it easier:

Staff training

Ensure all your employees are familiar with OFAC’s sanctions programs and the list of sanctioned individuals, entities, and countries. Mandatory staff training protects your company; it ensures that all employees know their obligations and how to identify and report potentially prohibited activity.

The training should cover the basics of OFAC compliance, such as the types of sanctions programs and identifying restricted transactions.

All employees who have contact with customers, vendors, or other individuals or entities who may be subject to OFAC sanctions must receive general training on OFAC compliance.

In addition, employees with roles exposed to high-risk activities (such as those who handle transactions or deal with foreign customers and subsidiaries) must receive specialized training on the specific risks associated with their function.

Regular refresher training is also necessary to keep employees up-to-date on changes to OFAC’s sanctions programs.

Enlist a qualified, responsible individual

Designating a qualified, responsible individual is crucial in maintaining OFAC compliance. The OFAC Sanctions Compliance Officer or OFAC Officer should have a deep understanding of OFAC regulations, be well-versed in the company’s OFAC compliance program, and have the authority to act on any potential violations.

They will perform the following:

• Create and enforce internal controls, enforcement guidelines, policies, and procedures to ensure that the company complies with OFAC regulations.
• Ensure that everyone in the organization knows their obligations and acts under the law.
• Sanctions screen transactions for any red flags indicating potential violations.
• Serve as a point of contact for OFAC inquiries and investigations, which can help protect the company from potential penalties.
• Conduct due diligence and risk assessment while evaluating the risk profile of customers and business transactions with external parties.

By having someone specifically tasked with overseeing OFAC compliance, the organization can be confident that its transactions are being monitored and conducted in a compliant manner.

Know your customer well

OFAC compliance is essential for businesses to avoid hefty fines and penalties. Knowing your customer well is one of the key ways to maintain OFAC compliance.

Understanding the risk profile of your customer looks different for every company, but there are some general things to keep in mind. A critical aspect of knowing your customer is verifying their identity, i.e., asking for identification or other documents that prove their identity.

Looking into your customer’s background will help you spot any red flags that may help you prevent potential sanctions violations. Knowing your customer and looking deep into your supply chain also enables you to develop procedures to mitigate any risks associated with doing business with them.

Looking to empower your company or government agency to protect your supply chains from lurking risks? Look no further than Exiger’s world’s first real-time Supply Chain Explorer.

Screen all transactions

Sanctions screening customer and transactional data against U.S. sanctions or other watchlists is crucial. Check the OFAC Sanctions Lists, including the Specially Designated Nationals and Blocked Persons List (SDN List)—to ensure they are not subject to sanctions.

Screening all transactions is essential in maintaining OFAC compliance to identify potentially prohibited transactions before they are completed.

The sanctions screening process involves the review of all transactions for any connections to entities or individuals subject to OFAC sanctions. This is important in maintaining OFAC compliance, as any violations can result in significant fines and penalties.

By screening all transactions, businesses can avoid inadvertently violating sanctions and facing penalties from the OFAC and other agencies.

Exiger offers a variety of tools to help businesses screen their customers and transactions for compliance with OFAC sanctions.

A proactive approach to OFAC sanctions compliance

A proactive approach to OFAC compliance will help ensure that your business complies with all applicable sanctions programs.

A proactive approach to OFAC sanctions compliance means developing and implementing a robust sanctions compliance program that includes regular reviews of your company’s transactions and screening processes to identify potential risks. This approach can help ensure that your company complies with OFAC sanctions and avoids penalties, fines, and reputational damage.

Keep up with changing OFAC requirements with Exiger

Building and maintaining a well-functioning sanctions compliance programs proves to be challenging for businesses and government entities alike, but by following some simple steps, businesses can ensure that they comply with all applicable sanctions programs and avoid any penalties or fines from OFAC.

With Exiger’s sanctions screening tools, you can be confident that you are doing business with authorized parties and are in compliance with all applicable sanctions programs.

For more information on how Exiger can help you stay compliant with OFAC sanctions, please contact us.