OFAC

What is OFAC?

The Office of Foreign Assets Control (OFAC) is responsible for administering compliance with U.S. sanctions programs, which include prohibitions against transactions with SDNs.

Examples of prohibited transactions

What are SDNs?

Specially Designated Nationals and Blocked Persons (SDNs) are individuals, governmental entities, companies, organizations and merchant vessels located around the world, with whom any kind of transaction is forbidden.

Who must comply with OFAC's requirements?

  • All U.S. citizens and permanent resident aliens
  • All persons located in the U.S.
  • Companies located in the U.S.
  • Overseas branches of U.S. companies
  • Overseas subsidiaries of U.S. companies

OFAC COMPLIANCE REQUIREMENTS ARE MANDATORY AND IN EFFECT NOW.

USA PATRIOT ACT COMPLIANCE REQUIREMENTS ARE SEPARATE AND DISTINCT FROM OFAC REQUIREMENTS.

What if I violate OFAC's requirements?

The consequences are based on a variety of factors. Inadvertent violations are more likely to be treated favorably if you have put forth a good faith effort to avoid prohibited transactions by implementing an OFAC compliance program.

Criminal violations - including those resulting from conscious disregard or refusal to comply with OFAC requirements - can result in corporate fines of up to $10,000,000, personal fines of up to $5,000,000, and/or up to 30 years in jail. OFAC can also impose civil penalties that range from $11,000 to $1,075,000 per violation.

Specific sanctions programs penalties

How do I comply?

Call us. We'll help you evaluate your risk profile and develop a comprehensive compliance solution that is customized to your needs.

USA PATRIOT Act

The Patriot Act amended the existing anti-money laundering provisions of the Bank Secrecy Act to promote the prevention, detection and prosecution of international money laundering and the financing of terrorism.  The anti-money laundering requirements of the Patriot Act apply to numerous types of businesses defined as "financial institutions" in the Bank Secrecy Act. Previously, the Treasury Department had discretion in enforcing the Bank Secrecy Act's anti-money laundering requirements and focused their attention primarily on traditional financial institutions, such as banks and securities broker dealers.  The Patriot Act removed that discretion by expanding the coverage of the Bank Secrecy Act to require anti-money laundering compliance programs of all financial institutions. These "financial institutions" include:

  • banks, including:
    • insured
    • commercial
    • trust companies
    • private bankers
    • U.S. branches of foreign banks
    • credit unions
    • thrift institutions
  • introducing brokers
  • commodities broker dealers
  • commodity trading advisors
  • commodity pool operators
  • securities broker dealers
  • futures commission merchants
  • issuers, redeemers or cashers of travelers checks, checks, money orders, or similar instruments
  • operators of credit card systems
  • telegraph companies
  • insurance companies
  • loan or finance companies
  • investment bankers or companies
  • persons or companies involved in real estate closings and settlements
  • currency exchanges
  • casinos, card clubs, and gaming establishments
  • money transmitters
  • pawnbrokers
  • travel agencies
  • automobile, airplane and boat dealers
  • dealers in precious metals, stones or jewels
  • U.S. Postal Service or any agency of U.S., state or local government carrying out a duty or power of business

Under the provisions of the Patriot Act, the Department of Treasury has, or soon will specify anti-money laundering compliance program regulations specific to each above-listed industry. The Patriot Act, at a minimum, requires that these programs include:

  1. the development of internal policies, procedures, and controls;
  2. the designation of a compliance officer;
  3. an ongoing employee training program; and
  4. an independent audit function to test programs.

Each financial institution is also required to implement a Customer Identification Program (CIP) that includes reasonable procedures to:

  1. collect identifying information about customers opening an account
  2. verify that the customers are who they say they are
  3. maintain records of the information used to verify their identity
  4. determine whether the customer appears on any list of suspected terrorists or terrorist organizations

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