OFAC Compliance- Internal Compliance Program

Transcription

1 OFAC Compliance- Internal Compliance Program SCCE 6 th Annual Institute 10 September 2007 Who is OFAC? The Office of Foreign Assets Control (OFAC) of the Department of the Treasury Administers U.S. economic sanctions programs, which prohibit dealing, in whole or in part, with nations currently disfavored by the U.S. Government. Comprehensive sanctions programs against Cuba, Iran, Iraq, Libya, and Sudan as well as more limited sanctions against Angola, Burma, Liberia and Sierra Leone. 1

2 Specially Designed Nationals and Blocked Persons List Contains names of countries, organizations, and individuals with which U.S. interests are precluded from conducting business and whose U.S. assets have been frozen. Regularly updated and should be cross-checked against the company s transactions. Available at Also known as the SDN list. OFAC Compliance Compliance with OFAC regulations requires: 1) checking the names of new customers or parties to a new transaction against the existing SDN list and 2) screening an existing customer or counterparty database against updates to the list. All matches, or "hits", must be investigated and cleared before a transaction can be completed and before reporting to OFAC. Contact OFAC's Compliance Hotline" at for verification or for in-process wire transfers: 2

3 Blocked vs. Prohibited Transactions Blocked Transactions Required when property is located in U.S., held by U.S. individuals or entities, or comes into the possession or control of U.S. individuals or entities. Funds must be placed into an interest-bearing account on your books from which only OFAC-authorized debits may be made. The blocking also must be reported to OFAC Compliance within 10 business days. Prohibited Transactions Underlying transaction may be prohibited, but there is no blockable interest in the transaction. Transaction is simply rejected, i.e., not processed. OFAC Reporting 1. Any transaction that has been blocked or rejected must be reported to OFAC within ten business days from the date the property became blocked 2. Annual report of all property blocked as of June 30 is due by September 30 of each year 3. OFAC requires the retention of all reports and blocked or rejected transaction records for five years. 3

4 Who must comply with OFAC? ALL U.S. companies, U.S. citizens and permanent resident aliens who are employees, officers, or directors of U.S. domiciled companies, including overseas branches, need to be aware that they may be held accountable for sanctions violations pursuant to OFAC. This includes ALL U.S. insurance companies and financial institutions must monitor all financial transactions performed by or through them to detect those that involve any entity or person subject to the OFAC laws and regulations. Consequences of Non-Compliance Penalties vary according to the Program violated, but can include: Corporate and/or personal implications Cautionary warnings Civil penalties of up to $1M or more Imprisonment Sanctions and settlements are posted to OFAC s web site. 4

5 Non-Compliance- Penalty Assessment Factors Aggravating Factors Willfulness Lack of Compliance Program Failure to take appropriate remedial action Mitigating Factors Self-discovery and self-reporting of violation(s) Existence of a compliance program OFAC COMPLIANCE PROGRAM Four key factors for effective Internal Compliance Program (ICP) Develop and implement written policies and procedures. Conduct training. Design and maintain effective screening programs. Conduct periodic independent testing of the program's effectiveness. 5

6 OFAC Compliance Program- Written Policies and Procedures Policy Statement identifying the objective of the Internal Compliance Program. Identify Trade Sanction Compliance Officer who is responsible for oversight of the ICP. List consequences for non-compliance. Detail policies, procedures, and processes for handling items that are valid blocked or rejected items under the various sanctions programs. Identify the OFAC Hotline Number OFAC Compliance Program Education and Training Train all employees at risk for exposure to OFAC violations Train according to risk propensity assessed Communicate method and frequency of training Awareness training for all employees 6

7 OFAC Compliance Program-Effective Screening Software not mandatory, but highly recommended since SDN list changes routinely. Interdict software searches transactions for names that match names on the SDN and other trade sanction lists and alerts of any matches that will require further research by the Company. Some software even prepares documents needed for meeting OFAC reporting and record-keeping requirements. Decision to use interdiction software and the degree of sensitivity of that software should be based on assessment of organizational risk and volume of transactions. OFAC Compliance Program- Independent Testing (Audits) Regularly performed by the internal audit department, outside auditors, consultants, or other qualified independent parties. Objective, comprehensive evaluation of the adequacy of OFAC policies, procedures, and processes. Identify potential violations and self-report as soon as possible. 7

8 FREQUENTLY ASKED QUESTIONS FAQ- Are there exceptions to the prohibitions? Yes. OFAC regulations often provide general licenses authorizing the performance of certain categories of transactions. OFAC also issues specific licenses on a case-bycase basis under certain limited situations and conditions. 8

9 FAQ- How should past violations be handled? Companies are encouraged to voluntarily disclose past violations. There is no amnesty period; however, selfdisclosure is considered a mitigating factor by OFAC in civil penalty proceedings. FAQ- How can we get permission to transact with an embargoed country? In some situations, authority to engage in certain transactions is provided by means of a general license. In instances where a general license does not exist, a written request for a specific license must be filed with OFAC. The request must conform to the procedures set out in the regulations pertaining to the particular sanctions program. 9

10 Questions??? Toll Free Hotline Local Hotline OFAC Licensing Division (Direct) Cuba Sanctions Violation Hotline (Miami)