OFAC Enforcement Guidelines

Schedule a Free Consultation Today
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 federal agency tasked with enforcing U.S. economic sanctions against foreign parties is the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). Because OFAC’s goal is to ensure the economic isolation of the targets of U.S. sanctions, it is very upfront with domestic companies on how to avoid violating sanctions and what will happen if OFAC detects signs of noncompliance or a potential violation.

To this end, OFAC regulations include its enforcement guidelines (31 C.F.R. Part 501 Appendix A), which explain what U.S. companies can expect if the agency suspects them of dealing with sanctioned entities.

If you or your company has learned that you are under investigation by OFAC for allegedly violating economic sanctions on a foreign entity, you need to take your defense seriously. The penalties of an adverse outcome are steep. The OFAC attorneys at The Criminal Defense Firm can guide you through this difficult and sensitive time.

OFAC’s Options After an Investigation Finds Signs of a Violation

The agency’s enforcement guidelines come into play if OFAC has learned of a potential violation of sanctions, investigated the allegation, and determined that their suspicion has some merit. As discussed in the next section, how OFAC moves forward will depend on a variety of circumstances and facts, include the severity of the violation and whether there are indications that the violation was willful or not.

Depending on these and other factors, OFAC can choose to:

  1. Continue the investigation by requesting more information
  2. Issue a cautionary letter
  3. Issue a Finding of Violation
  4. Impose a civil monetary penalty
  5. Refer the case to the U.S. Department of Justice (DOJ) for criminal charges
  6. Take some other administrative action

Some of these outcomes of an OFAC investigation are quite significant. None are trivial.

1. Request More Information

In many cases, OFAC’s initial investigation does not conclusively justify a particular enforcement action by the agency. There may still be questions that OFAC agents need answered before a final decision is made.

When this happens, OFAC will generally request additional information. They often do this through an administrative subpoena or, if there is a valid one, through a Memorandum of Understanding.

Once OFAC has obtained all of the information that it needs, it will return to this juncture and make a final decision.

2. Send a Cautionary Letter

OFAC’s investigation may not uncover strong evidence of a violation of sanctions, but still find that your company is out of compliance with OFAC’s requirements and therefore at risk of violating sanctions in the near future. When this happens, OFAC will generally send a cautionary letter that informs the company of the issues of noncompliance and instruct the company to fix them promptly.

Generally, the cautionary letter will wrap up OFAC’s investigation. However, if OFAC later learns of a sanctions violation that was related to the issue that was discussed in the cautionary letter, it can come back to haunt you.

3. Issue a Finding of Violation

OFAC can issue a Finding of Violation at the culmination of an investigation, as well. This determination is generally for low-level violations of sanctions where the agency does not think that monetary penalties are warranted. Once received, you have the opportunity to respond to the Finding of Violation. OFAC will consider your response before reaching its final decision and closing the investigation.

4. Impose Civil Penalties

More significant, but non-willful, violations of U.S. sanctions generally lead to the imposition of civil monetary penalties by OFAC. The amounts of these penalties are capped by the statute that authorized the sanction that was allegedly violated. However, OFAC distinguishes between “egregious” and “non-egregious” violations when imposing a civil monetary penalty, as well.

5. Make a Criminal Referral

For serious and willful violations of U.S. sanctions, OFAC will refer the case to the DOJ for criminal prosecution. If the DOJ elects to file charges, convictions carry multiple decades in prison.

Even after making the criminal referral, though, OFAC can still pursue civil or administrative claims against the target of the investigation.

6. Take a Different Administrative Action

Finally, OFAC has a few other enforcement actions at its disposal that it can use to reach its objectives after an investigation. It can:

  • Issue a cease and desist letter, instructing the target of the investigation to stop the conduct that threatens to violate sanctions
  • Take action against the target’s license to deal with a sanctioned party, up to and including a revocation

Factors OFAC Will Consider When Deciding How to Proceed

When deciding which mode of enforcement to take after an OFAC investigation finds evidence of wrongdoing, OFAC’s regulations and enforcement guidelines state that it will take the following factors into account:

  • Whether the conduct was a willful or reckless violation of the law
  • Whether the target of the investigation was aware of the conduct
  • Whether the conduct harmed the objectives of the sanctions program
  • The target’s commercial sophistication, history of OFAC violations, and size of their business
  • How vigorously the target followed OFAC’s compliance checklist
  • Whether the target took a remedial response to the apparent violation
  • How well the target cooperated with OFAC
  • Whether the sanctioned party had been under embargo for long enough for it to be widely known, or had only recently been sanctioned
  • Whether the target of the investigation is also facing enforcement actions by other state or federal agencies
  • Whether a strong OFAC response would deter future violations

Additionally, OFAC can take other relevant circumstances into account when deciding how to proceed.

Frequently Asked Questions About OFAC Enforcement Actions and The Criminal Defense Firm’s Legal Services

What is an 'Egregious' Violation of Sanctions That Can Increase a Civil Monetary Penalty?

If OFAC decides to impose a civil monetary penalty for a violation of sanctions, the amount that it can impose is only capped by the statute that authorizes the sanctions program. This gives the agency lots of discretion in how much to charge. If the violation was “egregious,” OFAC will increase the amount considerably.

Generally, in deciding whether a violation was “egregious” or not, OFAC will look to whether:

  • It was a reckless or willful violation

  • The target of the investigation was aware that it was going on

  • It undermined the objectives of the sanctions program

  • The target has faced OFAC enforcement actions in the past

If the Director or Deputy Director of OFAC decides that, based on these factors, the violation was particularly serious and that it calls for a strong enforcement response, OFAC will label the violation was egregious. This can significantly increase the civil monetary penalty that the agency ends up imposing.

What is the Best Way to Avoid an OFAC Investigation?

The best way to avoid scrutiny from OFAC is to create and maintain a tight compliance system that prevents even the illusion of a violation of U.S. sanctions law. Because it makes the agency’s job easier, OFAC has issued lots of guidance on how to create a compliance system that minimizes the odds that your company inadvertently does business with a sanctioned individual or entity. However, applying those guidelines to your company’s particular needs and risks is not so easy.

In addition to being an OFAC defense firm, The Criminal Defense Firm also has compliance professionals on hand with copious amounts of experience in creating compliance protocols that insulate companies from legal liability without overburdening the company with internal requirements.

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

The Criminal Defense Firm is unique among major law firms in that we only employ senior-level lawyers, investigators, and compliance professionals, ensuring that your case is handled solely by people who have spent years handling similar cases in the past. Many of our investigators and lawyers also had successful prior careers within some of the same federal law enforcement agencies that will be pursuing your case, giving us an advantage that many other law firms do not have.

Despite all of this, we do not call ourselves the best OFAC defense firm because we think that is a judgment that can only be made by our prior clients. Read their testimonials here and decide for yourself whether The Criminal Defense Firm is the best for your particular needs.

The OFAC Defense Lawyers at The Criminal Defense Law Firm

OFAC’s decision about how to proceed based on the evidence uncovered in an investigation is a huge one for you and your company. If they decide to make an example out of you, the odds of facing devastating penalties increase substantially. If they determine that the violation was relatively small and that the agency’s objectives will not be furthered by aggressive prosecution, your risks of crippling legal liability drop considerably.

Both during the investigation and in its immediate aftermath, it is not impossible to influence OFAC’s decision on how to proceed.

The OFAC lawyers at The Criminal Defense Firm have represented their clients – both corporate and individual – during this difficult and sensitive stage in a potentially devastating situation. Contact them online or call the central hotline for their national law offices at (866) 603-4540.

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