OFAC Compliance Checklist

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One of the biggest compliance challenges that many companies – particularly financial institutions – face in the current legal landscape is how to abide by the quickly-changing import and export laws that revolve around the economic sanctions that are enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC). The steps that regulated companies have to take to ensure that they are not violating U.S. economic sanctions against the country’s enemies are complicated. Worse, sanctioned individuals and organizations do all that they can to evade U.S. sanctions and work around your company’s compliance mechanisms.

These steps toward OFAC compliance got even more complicated thanks to the recent armed conflicts across the world and the global upheaval that took place throughout 2022. In 2023 more than ever, companies need to take OFAC compliance seriously.

The Criminal Defense Firm is staffed with numerous compliance professionals and OFAC defense lawyers that can help. Here is a listing of many of the most essential points for any OFAC compliance checklist in 2023.

Put our highly experienced team on your side

Brian J. Kuester
Brian J. Kuester

Former U.S. Attorney

Former DA

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney
& Former District Attorney

Local Counsel

John W. Sellers
John W. Sellers

Former Senior Trial Attorney
U.S. Department of Justice

Local Counsel

John W. Sellers
Linda Julin McNamara

Former Chief, DOJ Appeals

Local Counsel

Elizabeth Stepp
Elizabeth Stepp

Litigation Counsel

Aaron L. Wiley
Aaron L. Wiley

Former Federal Prosecutor

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (OIG)

Timothy E. Allen
Timothy E. Allen

Former Senior Special Agent

Chris Quick
Chris Quick

Former Special Agent (FBI & IRS-CI)

David M. Bentz
David M. Bentz

Former U.S. Secret Service Agent

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

Monitor International News to Get Ahead of New Sanctions

The people and organizations that get sanctioned by OFAC are not random. They are parties that pose a threat to American interests abroad or that are a threat to national security. They can be:

  • Terrorists, both individuals and terrorist organizations
  • Foreign leaders that behave aggressively towards the U.S.
  • Political movements and their leaders that are destabilizing their region
  • International aggressors
  • Drug cartels

Companies and their OFAC compliance team can get ahead of the agency’s moves by keeping up to date on international news. Oftentimes, it is not difficult to predict who is going to be subjected to economic sanctions by the United States. If a foreign organization or individual does something threatening to the U.S. or targets or kills U.S. nationals, companies can check their customer lists to see whether they are doing business with the aggressor. If the company finds that it is doing business with them, they can choose whether to preemptively take the steps necessary to comply with likely OFAC sanctioning or prepare for when the agency makes its move.

Always Watch the SDN and Other Sanctions Lists

The Specially Designated Nationals and Blocked Persons List (SDN) is one of OFAC’s main listings for people and parties that are subject to U.S. economic sanctions. OFAC expects companies to monitor the SDN and ensure that they are not conducting business with any of the people or organizations that are on it.

Typically, OFAC updates it to include new names or subtract existing ones about every couple of weeks. Recently, though, changes are often made multiple times per week.

The good news is that OFAC provides notification services for these updates via either email or RSS feed. This way, OFAC compliance professionals can get notified in their inbox of updates to the sanctions list rather than monitor it on their own.

There is also commercial software available to compare the names on the SDN with a corporation’s customer and vendor lists.

Closely Vet New Customers

When you get new foreign clients or customers, it is extremely important to vet them closely.

This involves more than just seeing if the name they give for themselves or their company is on the SDN or another list of sanctioned parties. Sanctioned parties frequently try to evade the embargo on them by using different names, inventing new companies, doing business through an intermediary, or by simply lying about who they are. If you simply take a new customer at their word, you could be exposing your company to significant legal liability for taking inadequate steps to comply with OFAC.

Watch Existing Customers for Signs They are Being Used to Evade Sanctions

Even current or existing customers can pose a threat to your OFAC compliance efforts. It is not unusual for newly sanctioned parties to turn to their network of associates to use them as intermediaries and continue to conduct business in spite of the sanctions. If the sanctioned party is especially powerful, they can even go outside their normal network and persuade, through threats of force, someone otherwise unconnected to them to do business on their behalf.

If that person or company being coerced into helping someone evade sanctions does business with your own corporation, this can draw you into the scheme to violate U.S. economic sanctions.

Monitoring existing customers, clients, and business associates for signs that they are under duress is important. Rapid changes in their behavior could indicate that they are no longer working for their own ends, and that they have instead become an intermediary for someone looking to evade U.S. sanctions.

Understand Your Company’s Unique OFAC Risks

All companies are different and will have unique levels of risk or exposure to potential OFAC violations. For example, domestic companies that have no international contacts are extremely unlikely to have OFAC compliance issues, while multinational corporations are virtually guaranteed to be at risk of violating OFAC sanctions on a weekly basis.

However, these risks also change depending on the type of business you run, and can also change if your business develops or experiences a change in status or form.

An example of the first issue is that financial institutions face OFAC compliance obligations that other companies do not. This is because financial institutions occupy a unique and special place in business transactions, making them ideal for additional regulations to enforce economic sanctions. However, the way OFAC regulations define a “financial institution” is much broader than many corporate stakeholders tend to expect.

An instance of the second issue is when a company is suddenly exposed to more OFAC risks by, for example:

  • Being involved in a merger or acquisition
  • Taking on an international vendor
  • Changing from using domestically-produced parts to foreign-made parts

These changes can put the company in violation of OFAC sanctions and should only be done carefully and after a close review of the situation.

4 FAQs About The Criminal Defense Firm and OFAC Compliance

1. What is a 'Financial Institution' Under OFAC Regulations?

31 C.F.R. § 561.309 is the regulation that defines what a “financial institution” is for the purposes of OFAC sanctions law. This regulation focuses on the types of services that the company provides: Businesses that hold their customer’s money for them, make loans, or manage business transactions on behalf of someone else are all “financial institutions.” While this makes for some obvious results – banks and credit unions are “financial institutions” – it also produces some that are less expected. For example, securities broker-dealers and their brokerage houses are also “financial institutions.”

This is a threat to the businesses that might be unaware that they are a “financial institution” under the law. Financial institutions are tasked with additional compliance requirements. Violating them can lead to serious repercussions.

2. What Kinds of Penalties are There for Noncompliance?

Failing to comply with OFAC’s guidelines for following the law can expose the company to serious legal issues. If the company’s noncompliance leads to it dealing with a sanctioned person or organization, the fallout can be devastating.

First, if news of the violation reaches the public’s eye, the damage to your company’s reputation can be crippling. Dealing with America’s enemies can be a difficult blemish to remove from a company’s past.

Second, if OFAC determines that the violation was willful, it can choose to pursue criminal charges. These carry huge fines and decades in prison.

Third, if OFAC decides that your failure to comply with the law was reckless or that you basically made no effort to do so, the penalties that it can pursue will increase substantially.

3. What Sets The Criminal Defense Firm Apart from Other OFAC Compliance Firms?

The Criminal Defense Firm is different from other OFAC compliance firms in several different ways. However, the most important difference is that we provide both criminal defense for allegations of OFAC violations as well as compliance services for companies that never want to hire us or anyone else for criminal defense.

This makes us stand out from other OFAC compliance firms because our compliance team and our defense lawyers make each other’s work even more exceptional. Our defense lawyers have seen firsthand how compliance protocols can fail, and that has helped our compliance professionals craft even better strategies for our clients. Meanwhile, our OFAC defense attorneys benefit from having OFAC compliance professionals in-house, as it gives them access to information that they can use to advocate for our clients in front of OFAC agents.

4. Why Don't You Call Your Firm the Best at OFAC Compliance?

We like letting our work, our past successes, and the experience and professionalism of our staff and lawyers to do that sort of talking for us. However, many of our prior clients have written similar testimonials about the services that we have provided for them.

OFAC Compliance Professionals at The Criminal Defense Firm

Of course, because every company is unique, there is no OFAC compliance checklist that will work for all of them. Each business will have specific risks and concerns that need to be addressed; risks and concerns that other businesses may not have at all. This makes getting personalized OFAC compliance strategies a must.

The OFAC compliance professionals at The Criminal Defense Firm can provide those services. Call their national phone number at (866) 603-4540 or contact them online to get started on a compliance system that insulates your company from liability.

Dallas 214-817-2053
Houston 713-454-7814
Detroit 313-634-0925
Baton Rouge 225-269-8749
New York 332-239-7345
Winter Park 407-890-0460
Miami 786-751-3247
Portland 207-222-7742
Nationwide 866-603-4540