Six OFAC Compliance Strategies

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Brian Kuester
Attorney Brian Kuester
Team Lead
Former US Attorney
Former District Attorney
Ellen Comley
Attorney Ellen Comley
Team Lead
Senior Counsel
Roger Bach
Roger Bach
Team Consultant
Former Special Agent (OIG)

The U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) is the federal agency that enforces economic sanctions imposed by the United States on foreign parties that threaten the country’s interests or national security. These economic sanctions are strict. If domestic companies or individuals are caught willfully doing business with a sanctioned party, criminal charges can be filed with convictions that carry huge fines and even the potential for decades behind bars for responsible individuals.

Complying with the sanctions that OFAC enforces is extremely important.

However, at no other time has it been this challenging to stay in compliance. More and more foreign nationals have been added to the lists of sanctioned parties in the last few years thanks to the war in Ukraine and other conflicts across the globe. Chances have never been higher for inadvertently dealing with a sanctioned party. Worse, many of the recent additions to the lists of sanctioned parties are savvy and technologically advanced, with numerous schemes at their disposal that they can use to mask their true identities.

Here are six OFAC compliance strategies that the OFAC compliance and defense lawyers at The Criminal Defense Firm are using for their clients in 2023.

1. Be on the Watch for Signs of Turmoil in Regions Where You Do Business

Conflict and turmoil are bubbling up everywhere around the world, not just in Russia and Ukraine. Paying attention to regions of the world where you do business or where you have business associates can give you enough of a heads up that you can take the actions necessary to insulate your company from legal risks if tensions flare enough that sanctions get imposed by the U.S.

A great and extremely blatant example of this in action was when Russia built up its armed forces all around Ukraine’s borders in the weeks before invading. While Russia claimed that it was conducting military exercises, the amount of the forces and supplies that it put on Ukraine’s borders cast doubt on that claim.

Companies that were paying attention to the realities on the ground were in a much better position to react than companies that ignored the situation or that took Russia’s explanation at face value: They were able to develop alternative lines of business more quickly after Russia invaded and the U.S. imposed crushing economic sanctions on any company that played a part in the war.

2. Watch Current Business Associates for Changes in Behavior

A very common tactic that sanctioned parties – particularly those that are politically powerful, even if only on a local level – will do to evade U.S. economic sanctions is to tap into their network and get others to act as intermediaries for them. This can make them extremely difficult to detect, which poses a significant obstacle for companies to face in their OFAC sanctions compliance efforts. Companies have to vet new associates and clients very closely, and still may fail to notice the connection between the person they are doing business with and the sanctioned party.

What many American companies and individuals overlook, though, is the potential for a sanctioned party to lean on someone who is already a customer or one of the company’s current business partners or vendors. They would have already gone through the vetting process and come out clean because they were not acting as an intermediary at the time.

This is why companies have to monitor the behavior of their foreign business partners whenever regional turmoil has led to the U.S. imposing a new round of sanctions in the area. When it seems like a customer is no longer acting in his or her best interests, it may be because they are not, anymore. At the very least, companies should do their due diligence whenever they notice strange signs in their foreign business associates’ behavior.

3. Audit Your Existing Compliance System

In the agency’s own words, one of the fundamental aspects of an OFAC compliance strategy is to audit it regularly. Only by auditing it can you know that it is working as it is supposed to.

Because of the recent action in sanctions law, 2023 is the best time to audit your OFAC compliance efforts, particularly if you have not done so for several years.

The flurry of additions to the Specially Designated Nationals and Blocked Persons List (SDN) after the outbreak of the war in Ukraine drastically increased the risks of accidentally dealing with a sanctioned party. Your OFAC compliance efforts were done for the purpose of avoiding this possibility. Reviewing those efforts to make sure they are still working the way that they are supposed to work is the only way to know for sure whether your company is insulated from those risks or not.

4. Reassess Your Company’s Risks

Similarly, reassessing where your company’s most pressing risks are for violating OFAC sanctions is a key component to OFAC compliance in 2023, especially if your company has not reassessed its risks since implementing its compliance system.

Over the normal course of business, companies evolve. They take on new clients and embark on new ventures. Each one presents the potential for creating new risks of violating U.S. economic sanctions, or for decreasing them.

There is a substantial chance that your company’s risks of violating OFAC sanctions have moved around since you last checked. Reassessing them so you know where the risks are is an important compliance strategy for 2023, and can help you use the resources you dedicate to compliance efforts more efficiently.

5. Monitor SDN Lists Even More Closely

Obviously, every OFAC compliance strategy involves monitoring the SDN lists for sanctioned individuals and parties to avoid dealing with. If your OFAC compliance personnel have not already signed up for the automated notifications about SDN updates, now is the time to do so.

6. Retrain Important Employees on OFAC Compliance

OFAC guidance also tells companies to train and retrain relevant employees on the company’s OFAC compliance protocols. Due to the increased risks of violating economic sanctions in 2023, now is the time to schedule some retraining sessions to ensure that the workers who are most likely to see violations occur, or at least the warning signs that they might occur, are primed on what to look for and how to respond to it.

The good news about this compliance strategy is that it is easy and relatively low-cost. If you have an OFAC compliance officer or employee within the firm who can handle the training session, it can set the company back as little as a few hours of missed time by each employee who has to be retrained.

Frequently Asked Questions About OFAC Law and The Criminal Defense Firm

What are the Penalties for Violating American Sanctions?

The penalties for doing business with a sanctioned entity depend on two things: The law that authorized the sanctions, and whether you willfully dealt with a sanctioned party.

If you willfully helped someone evade sanctions, OFAC will refer the case to the U.S. Department of Justice (DOJ), which will file criminal charges that carry decades in prison for a conviction. If the violation was not willful, like if you did not know that you were only dealing with an intermediary and that a sanctioned party was the true benefactor of the business relationship, OFAC can still pursue a civil claim.

Regardless, the financial repercussions of violating U.S. economic sanctions are significant. Some laws impose over a million dollars in civil fines per violation. Additionally, the reputational harm that you or your business suffers can be crippling, especially if the sanctioned party you dealt with had any notoriety.

Is a Violation a Crime?

If you willfully violated U.S. sanctions, yes, the case can be pursued as a crime. OFAC will refer the case to the DOJ.

Why Should I Consider Hiring The Criminal Defense Firm for My Company?

There are several things that set The Criminal Defense Firm apart from other law firms and compliance companies that handle OFAC issues.

First, we are a national law firm that has offices in most major U.S. cities. No matter where you are located, chances are that The Criminal Defense Firm has a foothold in your area and can help you with your legal questions and concerns.

Second, all of the lawyers and investigators on our staff have extensive experience in white collar defense work, including in OFAC-related issues. Many of them only came to our firm after long and successful careers within the DOJ, the Department of the Treasury, or other leading federal law enforcement agencies.

Third, our staff is comprised entirely of these senior-level associates. This means that your case will not get delegated to less experienced attorneys or to paralegals. We do not have junior associates or paralegals in our firm. All of the work done on your case will be performed by the lawyers with the experience that attracted you to The Criminal Defense Firm.

Why Don't You Call Yourselves the Best OFAC Law Firm?

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The OFAC Compliance and Defense Lawyers at The Criminal Defense Firm

The OFAC compliance and defense lawyers at The Criminal Defense Firm have seen an uptick in companies across the country seeking outside help in OFAC- and sanctions-related matters. Contact them online or call their law offices at (866) 603-4540.

Dallas 214-817-2053
Houston 713-454-7814
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Nationwide 866-603-4540