Wed, Aug 28, 2019
In May 2019, the Treasury’s Office of Foreign Assets Control (OFAC) published a set of sanctions compliance guidelines, A Framework for OFAC Compliance Commitments, to help companies better understand their compliance obligations as they relate to sanctions and how to establish internal and external procedures for adhering to those obligations. The agency is already using components of the new framework in its settlement agreements, including a $611 million settlement just a few months ago. There are important considerations businesses should consider with this new framework, and key ways in which OFAC’s guidelines could impact your organization.
OFAC is the U.S. Treasury Department’s financial intelligence and enforcement agency which administers and enforces trade sanctions in support of U.S. national security and foreign policy objectives. At its core, the group acts as an enforcement agency, meaning that its guidance on compliance issues must be taken into consideration by any entity conducting foreign transactions. OFAC works with the Department of Justice to enforce the U.S. government’s various sanctions regimes, including the comprehensive trade embargos impacting Cuba, North Korea, Syria and Iran, as well as the evolving programs affecting Russia and Venezuela.
OFAC’s compliance mandates affect any U.S. person and entity, including U.S.-owned or controlled subsidiaries abroad, as well as foreign groups that work with the U.S.—be it physically in the U.S., with U.S. entities or persons abroad, with the U.S. financial system or using U.S.-origin goods or services. The bottom line is that all of these groups are subject to OFAC regulations.
Sanctions enforcement is on track to hit 10-year highs for both the number of actions taken and settlement values. In fact, penalties have already reached $1.2 billion. Just six months into 2019, enforcement totals already amounted to 25% of the enforcement totals of the last 10 years.
OFAC has outlined the following general components that can influence the outcome of an investigation conducted in response to an apparent violation:
Importantly, the OFAC guidance emphasizes that subjects that have an effective sanctions compliance program (SCP) in place at the time of the potential violation will be considered in a more favorable light. That means that having a strong SCP not only helps your organization improve the likelihood that you’re staying in step with OFAC regulations, but it also shows regulatory bodies that you have the tools to take corrective action if a violation occurs.
If violations are found, the offender may be subject to penalties, and OFAC’s Office of Compliance and Enforcement (OCE) will determine how the offender’s SCP should be strengthened as part of an accompanying settlement agreement. OFAC will evaluate the offender’s SCP in a manner consistent with the Economic Sanctions Enforcement Guidelines.
An effective SCP can help businesses in several ways. If your business is already under investigation, a credible SCP can minimize the consequences. However, having a strong SCP in the first place will help you avoid trouble altogether.
It’s rare for an enforcement agency, particularly OFAC, to offer the kind of public guidance that it has with its framework, making the recent documentation that much more valuable. Here’s a simple guide to the five components OFAC says are essential in an SCP:
Nobody wants to be found liable of a compliance violation or deal with the lasting reputational damage penalties cause. Knowing the most common mistakes that lead to violations can keep you from costly fines, criminal prosecution and bureaucratic headaches.
An effective SCP can identify liabilities, pick out suspected hazards, and report on the underlying causes of these weaknesses. They should prevent violations, but they should also help organizations improve their ability to independently promote a stronger internal culture of compliance and equip them with custom tools for success.
As OFAC’s direction confirms, having the right SCP goes hand-in-hand with following OFAC guidelines. However, not every SCP meets, let alone exceeds, expectations. For organizations across industries, Kroll can make a positive difference when it comes to sanctions compliance.
As a global screening and due diligence solutions provider, we take a multi-pronged approach when it comes to assessing sanctions risk at almost every level of due diligence. In addition to determining whether a target party is sanctioned or based in a jurisdiction subject to OFAC sanctions, our team of skilled, multi-lingual researchers look for the party’s connections, whether via subsidiaries or business dealings, to other sanctioned jurisdictions. We also offer beneficial ownership screenings to ensure compliance with OFAC’s 50 percent rule.
Our team of senior experts includes former law enforcement officials and compliance professionals. We know how to create a culture of compliance and can provide companies with the tools to develop their own.
Our team recognizes the fact that your organization needs wide-reaching, risk-based due diligence. We have a range of options from light-touch screenings to deep-dive due diligence. That also means customizing research to the client’s needs and assessing sanctions vulnerabilities quickly and thoroughly.
We know due diligence is about more than just sanctions. We help organizations comply with a wide range of regulatory requirements, including anti-money laundering and anti-bribery and corruption regulations, as well as reputational risk—tailored to your organization.
We use the latest technology to help companies manage third-party risk. The Kroll Compliance Portal allows companies to run automated sanctions screenings in real time and set up ongoing monitoring.
Have questions about your organization’s compliance needs? Get in touch with our sanctions compliance experts today.
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