ATTUS Technologies was kind enough to host a webinar on OFAC compliance. Bradley Allen, CAMS, gave the presentation and these are my notes.
The mission of Office of Foreign Assets Control is to administer and enforce economic and trade sanctions based on U.S. foreign policy and national security goals against selected targets. It really came into the forefront as a result of the Post 9/11 policies. OFAC is not just about terrorists and terrorism countries, but also narcotics traffickers and drug kingpins.
Bradley led us through the history of OFAC
- Secretary Gallatin – Embargo Act of 1807
- Civil War “Trading with the Enemy Act” (TWEA)
- WW I “Trading with the Enemy Act of 1917”
- WW II Office of Foreign Funds Control (FFC)
- German Invasion of Norway 1940
- FFC Regulations – Economic Warfare
- FFC becomes OFAC – December 1950
- TWEA applied to North Korea & China
- TWEA applied to Cuba – 1963
- IEEPA – Peacetime Sanctions – 1977
The key piece is the Specially Designated Nationals list that is gathered by several government agencies with a thorough review process before getting on the list. (It also makes it hard to get off the list.)
The enforcement options can range from no action, issuing a warning letter, a revocation of an export license, civil penalties and even criminal prosecution. There is currently a $250,000 minimum penalty or 2x the value of transaction, whichever is greater. There have been very few criminal prosecutions. The new enforcement guidelines are under IEEPA Enhancement Act October 16, 2007 (P.L. 110-96, 121 Stat 1011) The penalty depends on whether the conduct was egregious and whether you voluntarily disclosed the violation.
There are various pieces of authority for the OFAC lists and enforcement:
- Trading With the Enemy Act (TWEA), P.L. 65- 91, 40 Stat. 411 (Oct. 6, 1917)
- International Emergency Economic Powers Act (IEEPA), P.L. 95-223, 91 Stat. (Dec. 28, 1977)
- Executive Order 13224
- Various other statutes
Chiquita was fined $25 million by OFAC for paying a Columbian terrorist group for protection. Farq had threatened to kill the Chiquita workers.
Lloyds TSB was fined $350 million for doing business in Iran. Even though they were based in London, they routed wire transfers through new York. That made them subject to OFAC.
For OFAC compliance, you need to screen all new relationships before engagement in business (clients, vendors, and employees). The OFAC list is updated frequently (there were 54 updates last year.) You need to re-screen periodically and you need a policy to memorialize when you re-screen.