All covered parties and entities have to comply with the requirements laid out by the Office of Foreign Assets Control (OFAC) at the U.S. Department of the Treasury. This Office is responsible for enforcing U.S. economic sanctions. Failing to take these compliance steps can expose a company or individual to legal liability and some significant penalties: In addition to huge financial fines and potentially even prison time, violating U.S. sanctions can lead to lots of bad press that can tarnish a company’s brand and reputation.
The OFAC defense attorneys and compliance professionals at The Criminal Defense Firm strive to help their clients comply with OFAC law and defend them against allegations that they violated it.
Here is what you need to know about OFAC compliance requirements for 2023.
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Brian J. Kuester
Former U.S. Attorney
Former DA
Amanda Marshall
Former U.S. Attorney
Local Counsel
Joe Brown
Former U.S. Attorney
& Former District Attorney
Local Counsel
John W. Sellers
Former Senior Trial Attorney
U.S. Department of Justice
Local Counsel
Linda Julin McNamara
Former Chief, DOJ Appeals
Local Counsel
Joanne Fine DeLena
Former Assistant U.S. Attorney
Local Counsel
Aaron L. Wiley
Former Federal Prosecutor
Local Counsel
Roger Bach
Former Special Agent (OIG)
Chris Quick
Former Special Agent (FBI & IRS-CI)
Kevin M. Sheridan
Former Special Agent (FBI)
Ray Yuen
Former Supervisory Special Agent (FBI)
Dennis A. Wichern
Former Special Agent-in-Charge (DEA)
All OFAC Compliance Begins With the Basic Checklist
Because OFAC’s primary goal in enforcing U.S. economic sanctions is to cut off the financial support of targeted parties and Specially Designated Nationals (SDNs), the agency is very helpful in distributing guidance materials so that American companies and individuals can take the steps necessary to comply with the laws that OFAC enforces. While the agency stresses that every company will come into compliance in different ways and that every entity will have different risks, compliance protocols generally have to cover at least the five following elements:
- A commitment from management to reach and maintain compliance,
- Thorough risk assessments and reviews,
- Internal controls sufficient enough to detect potential violations and then follow up on them,
- Testing and auditing, and
- Training and retraining of relevant employees.
Importantly, because OFAC names these steps for compliance efforts, not taking them can be risky decisions that lead to more vigorous enforcement by the agency, should there be signs of a violation.
Managerial Commitment to Compliance
OFAC emphasizes that any efforts at complying with U.S. economic sanctions and avoiding business dealings with SDNs has to start with management. If management and a company’s executive leadership do not take OFAC compliance seriously, neither will the employees who are in the best position to notice potential violations or who deal directly with the company’s business associates. If management blows off the concerns of violating economic sanctions abroad, so too will the workers.
Risk Assessments
OFAC recommends conducting risk assessments to find out where a company’s most pressing needs are before drafting an OFAC compliance strategy, and companies stand to benefit from taking the agency’s advice. Not only does a good, thorough risk assessment isolate the areas where a company is most at risk of committing an OFAC violation, allowing the company to pinpoint its compliance efforts efficiently; but conducting a risk assessment avoids the inefficiencies that come with a blind effort to comply with OFAC requirements.
Internal Controls
OFAC also tells companies to implement internal controls that are reasonably likely to detect and react to signs that the company might be violating U.S. sanctions by dealing with an SDN. These controls are generally in the form of policies and procedures that instruct employees on how to:
- Identify potential OFAC violations
- Escalate a suspected violation to the appropriate party within the company
- Create a report of the suspected violation
- Maintain records of the process used and reaction to the issue
Given the fact that many OFAC violations are unintentional and that sanctioned parties frequently try to evade U.S. sanctions by using intermediaries or a labyrinth of shell companies, these internal controls are essential. They can help companies see through changes made by existing business associates that signal that they are actually dealing with an SDN.
Auditing
All of the elements of a company’s compliance mechanisms need to be tested and audited on a regular basis to ensure they are all acting as they should. This is especially important for OFAC compliance structures, as OFAC sanctions shift frequently and with very little notice. If audits are not performed, companies will not know that they are behind the times and that their compliance efforts are no longer insulating them from legal liability.
Training
Of course, all compliance protocols have to be distributed and taught to relevant workers within the company, or else the scheme will never be implemented. However, OFAC stresses the need to not just train employees about OFAC compliance, but also to retrain them frequently to ensure they remember what their role is within the company when it comes to avoiding sanctioned parties.
Additional OFAC Compliance Requirements or Recommendations for 2023
Global conflict, including the war in Ukraine, have brought a renewed vigor to OFAC sanctions law. In the past year or so, the SDN list has been amended on a nearly constant basis to keep up with the rapidly growing list of people and companies that the U.S. deemed to be a threat to American interests abroad or to national security.
Taking OFAC compliance more seriously in 2023 than you had before can be a wise move. A few potentially wise moves to make include:
- Auditing your existing OFAC compliance protocols to ensure they are still working properly. The risks of violating U.S. sanctions are higher now than they were before, so chances are also higher than noncompliance could turn into legal liability for an OFAC violation
- Monitoring the SDN lists more often than before, as they continue to get updated and amended very frequently
- Taking a close look at the company’s cybersecurity software to ensure it is still adequate for OFAC compliance. OFAC amended its regulations related to cybersecurity in September, 2022, so if your company has not reviewed its cybersecurity protocols since then, there is a chance that it no longer complies with OFAC requirements
- Designating an OFAC compliance officer whose sole job is to insulate the company from liability from OFAC violations
4 Frequently Asked Questions About OFAC Sanctions Law and The Criminal Defense Firm
1. What are the Penalties for Violating OFAC Economic Sanctions?
The penalties for an OFAC violation will depend on the law that authorized the particular sanction at issue. Sanctions can be imposed by the President of the United States under several laws that have been passed by Congress, like the Trading With the Enemy Act and the Foreign Narcotics Kingpin Designation Act. Each law carries its own set of sanctions, though they frequently include hundreds of thousands of dollars in criminal fines and decades behind bars if OFAC prosecutes the offense as a crime.
However, not all OFAC violations are pursued as criminal offenses. Only willful violations of U.S. economic sanctions are crimes. Accidentally conducting business with a sanctioned party is generally a civil offense. Even these civil cases, however, can lead to massive financial penalties. Additionally, companies are likely to face lots of bad publicity if they are caught doing business with a sanctioned party, especially if they have any notoriety or infamy.
2. Is Violating OFAC Sanctions a Crime?
If the violation was done willfully, then OFAC will generally prosecute the offense as a crime by referring it to the U.S. Department of Justice (DOJ). However, while unknowingly doing business with an SDN is not a criminal offense, OFAC can still file a civil claim against you or your company for the violation.
3. Why Should I Hire The Criminal Defense Firm?
There are several reasons why The Criminal Defense Firm can be your best option for defending against an allegation by OFAC or for complying with its requirements.
First and foremost, we have both compliance professionals and defense lawyers at our firm. No matter what your OFAC needs are, we have the personnel to help. More importantly, though, the experience of our defense team and of our compliance team help the other one do their job even better. For example, our OFAC defense lawyers have first-hand knowledge about which compliance mechanisms fail to insulate companies from legal liability, and that helps our compliance team do better.
Second, everyone on our roster is a senior-level attorney or investigator, often with prior experience working within federal law enforcement agencies such as the U.S. Department of the Treasury or the Federal Bureau of Investigation (FBI). This means that your case will be handled by attorneys and compliance professionals who have copious experience handling similar cases for other clients in the past. It also means that all of the work will be done by these professionals – unlike other law firms, we do not have junior associates or paralegals to delegate your case to. This ensures that your case will be handled by the same lawyers that drew you to our firm.
4. Why Don't You Call Yourselves the Best OFAC Compliance and Defense Firm?
That is something that means more when it comes from the testimonials left by our prior clients than when it comes from us.
OFAC Compliance and Defense Lawyers at The Criminal Defense Firm
2023 is a big year for OFAC’s enforcement of U.S. economic sanctions. While the sanctions target foreign nationals and companies, the penalties for violating them are imposed against domestic individuals and companies that do business with SDNs. This makes it very important to ensure that your company’s OFAC compliance system is up-to-date and working properly.
The compliance professionals at The Criminal Defense Firm can help new companies create an OFAC compliance structure that effectively insulates them from liability without undermining its efficiency, and can help older companies review their existing OFAC compliance system to make sure it is still up to the task. The OFAC defense lawyers at the firm can also legally represent companies and individuals who have been accused by OFAC of violating U.S. sanctions.
Contact us online or call our national law firm at (866) 603-4540.