What is ofac compliance

Regardless of what you export to other countries, you need a compliance program that ensures you are compliant in all areas of your business to prevent export violations. Due to their far reach, any corporation that does business internationally should evaluate its practices and develop plans to ensure compliance with these rules.

Talk to our team today to learn more about how we can help keep your business safe! The result of making an informed decision about identity by comparing known attributes with corresponding records. A process through which the origin of illegal funds is concealed in order to appear as if they resulted from legitimate means. An identification number issued by a country. Treasury office responsible for developing, administering and enforcing economic and trade sanctions.

Some sanctions are based on United Nations and other international mandates; therefore, they are multilateral in scope, and involve close cooperation with allied governments. Others are specific to the foreign policy and national security goals of the United States. Sanctions are targeted against entities including foreign countries, terrorists, international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction.

All U. Some sanctions extend compliance to foreign branches and subsidiaries. In general, the regulations require the following:. OFAC has the authority, through a licensing process, to permit certain transactions that would otherwise be prohibited under its regulations. OFAC can issue a license to engage in an otherwise prohibited transaction when it determines that the transaction does not undermine the U.

OFAC can also promulgate general licenses, which authorize categories of transactions, such as allowing reasonable service charges on blocked accounts, without the need for case-by-case authorization from OFAC. Specific licenses are issued on a case-by-case basis. A specific license is a written document issued by OFAC authorizing a particular transaction or set of transactions. To receive a specific license, the person or entity who would like to undertake the transaction must submit an application to OFAC.

If the transaction conforms to U. Exercise of the right to net out mutual indebtedness. Offset is a prohibited transfer of frozen assets in situations of blocked property. When foreign assets held by an American company including a bank are frozen, the assets and any claims which the American company may have against the foreign owner are kept separate.

Finding and gathering information that is available to the public through sources such as the internet, court records, and newspapers. The universe which must comply with OFAC regulations. It includes American citizens and permanent resident aliens wherever they are located; individuals and entities located in the United States including all foreign branches, agencies, rep offices, etc.

Current or former senior foreign political figures, their immediate family, and close associates. While there is no uniform definition for PEP, there is an international consensus to identify politically exposed persons, their family members, business partners, as well as government owned entities for the purposes of reducing the chance of a violation under the FCPA. Although not a full list, some examples of products, services, customers, and geographic locations that have a high OFAC risk include:.

Every business should have controls in place that ensure compliance with OFAC regulations. When dealing with a high volume of AP transactions, there should be some key rules in place to maintain controls:.

It starts with training employees properly on the OFAC compliance process. They should have the appropriate level of knowledge about OFAC regulations, including the sanctions list and blocked persons. Especially if your business regularly engages in global transactions. This is why KYC know your customer is important.

Onboarding any partner must involve a background check, including screening on OFAC watchlist databases for:. This must be part of your standard onboarding workflow and can be done digitally. Always do what you can to ensure the supply chain is on the right side of the law. Even if you have been doing business with a vendor for months, every transaction must be monitored and screened.

Fraud usually happens when there is a lapse, and not often on the first attempt. Every point of contact should be a point to reverify or revalidate a payee. Many AP systems driven by business intelligence will give companies the option to flag bad actors themselves. This helps a business take a proactive, community-driven approach to enforcing OFAC rules. As soon as the platform sees a red flag with a payee, an immediate investigation is launched and if necessary, authorities are contacted.

Every business should randomly conduct an independent test of its OFAC compliance program. This can be done in a few different ways, including an:. The frequency and area of the independent tests should be based on the perceived business risk.

The person responsible conducts a comprehensive evaluation of OFAC policies, processes, and procedures. An OFAC check is also looking for anyone who is recreating weapons of mass destruction. Anyone who works with a vendor or individual that does not pass an OFAC check can be criminally charged and fined under federal law.

All updated financial sanctions of the OFAC are listed on the recent actions page. As global relations and events consistently change, the OFAC will continue to monitor and update the sanctions list. Being a sophisticated actor is one of the prominent metrics used to determine the level of penalties an individual or entity faces. The Office of Foreign Assets Control deals with civil penalties for sanctions violations but they may work hand-in-hand with the Department of Justice or other agencies in the federal government or in the state governments to pursue criminal charges and penalties for sanctions violations.

An OFAC compliance lawyer will work with clients to develop compliance programs. If you think that some of the steps described here may be too much for the size of your company that currently operates overseas, a compliance program can be tailored to the size and nature of your business.