OFFICE OF FOREIGN ASSET CONTROL (OFAC) Date: 2-26-02 GENERAL POLICY STATEMENT: The Credit Union shall comply with requirements of the Office of Foreign Assets Control (OFAC), Department of the Treasury, to block and to furnish reports on payments and transfers of funds to, and accounts and property held by, select foreign countries and persons that are subject to sanctions in the interest of U.S. foreign policy and national security. The Credit Union recognizes that failure to block an account or report a transfer may subject the Credit Union to civil and criminal penalties. OFAC COMPLIANCE PROGRAM: (1) OFAC Compliance Officer. The Executive Vice President is designated the OFAC Compliance Officer responsible for monitoring OFAC compliance and overseeing blocked funds. Executive management may also assign compliance responsibilities to operations and systems managers. (2) Audit Department. McGladrey & Pullen, LLP will conduct an annual audit to verify compliance with OFAC policies and procedures. (3) Risk Assessment. The OFAC Compliance Officer shall at least annually assess the risk of potential OFAC violations in every area of Credit Union operations. (4) Rules and Procedures. Each department subject to potential violations shall establish rules and procedures to monitor for and insure compliance with OFAC regulations. A person in each such department shall be designated as responsible for implementing the rules and procedures. All employees shall sign a statement indicating that they have read and understand the rules and procedures and this policy and that violating them will result in disciplinary action. They shall sign another such statement after each significant change in the policy, rules and procedures. (5) OFAC Training. The Credit Union shall train key operations staff members to recognize and stop suspect transactions for further review by the OFAC Compliance Officer or other designated compliance manager. More detailed training will be given to account representatives, platform staff and staff responsible for letters of credit and wire transfers to be able to recognize the persons and entities on the Specially Designated Nationals and Blocked Persons list (Blocked Persons List). The OFAC Compliance Officer shall periodically review OFAC regulations and report related developments in staff meetings. OFFICE OF FOREIGN ASSET CONTROL Page 1
(6) OFAC Software or Third Party Screening. The Credit Union shall evaluate 1) purchasing appropriate software to screen and interdict illicit funds transfers or 2) utilizing an outside service provider to perform necessary screening. Such software or service shall contain and filter every name on the Blocked Persons List along with generic words for countries and cities. GTFCU has selected Bridger, Inc. to interface with UltraData for weekly database checks and in and outgoing wires. Manual checks can also be performed at OFAC Internet web site at www.treas.gov/ofac. If the Credit Union determines that effective software or screening service is not available through third party resources, the Credit Union shall use such manual and internally developed electronic compliance programs that will ensure compliance. (7) Reviews for Blocked Persons. The OFAC Compliance Officer or other designated compliance manager shall maintain an updated Blocked Persons List by regularly consulting the OFAC Internet web site at www.treas.gov/ofac and also will utilize the Bridger, Inc. software interface. Responsible Credit Union staff shall regularly review the persons and entities on the list and assure that accounts and transactions related to those persons and entities are compared for possible matches. Such reviews shall include but are not limited to: (d) (f) Member accounts. New accounts shall be reviewed before any funds can be transferred. Existing accounts shall be regularly reviewed to determine whether or not any are subject to being blocked. Further review shall be made whenever significant changes are made to the Blocked Persons List or to OFAC regulations. Wire transfers. Outgoing transfers shall be reviewed before they are released, and incoming transfers shall be reviewed before crediting the appropriate account. The reviews shall include all parties to the transfers. ACH transactions. ACH transactions will not be reviewed until an interface by UltraData is completed, which is scheduled to be released in May 2002. Checks. All checks presented for deposit or cash shall be reviewed before crediting the appropriate account or dispensing cash. Purchasers of cashiers or tellers checks and money orders shall also be reviewed. Loans and lines of credit. All parties to a loan transaction, including guarantors and collateral owners shall be reviewed as shall persons and entities making loan payments. Transactions for others. If a member transacts business on behalf of another party, that party must be reviewed before any transaction is permitted. OFFICE OF FOREIGN ASSET CONTROL Page 2
(8) Blocked funds. If a review finds a match with the Blocked Persons List, the responsible staff member shall immediately call a supervisor to confirm that the match is not a false positive. If the match involves a withdrawal of funds, the member will be told that withdrawal cannot be allowed at that time. If the match involves a deposit or transfer of funds or other property, the supervisor will accept the funds or property and immediately place a hold on or freeze them and place them in a new or existing account in the name of, or that contains a means of clearly identifying the interest of, the individual or entity subject to blocking. The supervisor shall then promptly notify the OFAC Compliance Officer or other designated compliance manager in writing or by email of all facts and circumstances of the blocking action. (9) Reporting. Initial Report. The OFAC Compliance Officer or other designated compliance manager shall report all blocked accounts to the OFAC within ten business days from the date that the funds, property, payments or transfers are blocked. The initial report shall describe the owner, the property, its location, any account number, the value and the date it was blocked, and the name and address of the holder, along with the name and telephone number of the OFAC Compliance Officer or other designated compliance manager. If the report involves the receipt of a blocked payment or transfer of funds, the report shall include a photocopy of the payment or transfer instructions received and shall confirm that the payment has been deposited into a new or existing blocked account. Annual Report. The Credit Union shall file with OFAC a comprehensive report on all blocked property held by the Credit Union as of June 30 of the current year by September 30, using approved OFAC forms. (10) Rejected Funds Transfers. Where a government sanctions program prohibits a transaction, the Credit Union shall reject any transfers that are prohibited or that would facilitate a prohibited transaction. If there is any uncertainty as to whether or not a transaction should be rejected or blocked, the OFAC Compliance Officer shall call the OFAC Compliance Hotline for assistance. Examples of transactions involving rejected funds transfers include funds transfer instructions: Referencing a blocked vessel but where none of the parties or financial institutions involved in the transaction is a blocked person; Sending funds to a person in Iraq; Transferring unlicensed gifts or charitable donations from the Government of Syria or Sudan to a U.S. person; OFFICE OF FOREIGN ASSET CONTROL Page 3
(d) Crediting Iranian accounts on the books of a U.S. financial institution; and Making unauthorized transfers from U.S. persons to Iran or the Government of Iran. The Credit Union shall file a report to OFAC within ten business days after rejecting instructions to execute payments or transfers involving underlying transactions prohibited by the OFAC regulations. The report shall include the name and address of the transferee financial institution, the date of the payment or transfer, the amount of the payment or transfer, and a photocopy of the payment or transfer instructions received, and shall state the basis for the rejection of the instructions. The report shall also provide the name and telephone number of the OFAC Compliance Officer or other designated compliance manager. (11) Exceptions to Blocking. Once a blocked account is established, transactions or transfers with respect to the account are not allowed unless authorized by OFAC. Exceptions may be made under the following circumstances: (d) Non-blocked Joint Accountholder. The Credit Union shall consult with legal counsel before permitting a non-blocked holder of a joint account to have access to a blocked account in accordance with a special license issued by OFAC. Permissible Payments. The Credit Union shall consult with legal counsel before permitting withdrawals from blocked accounts for payment of necessary living and medical expenses, funeral expenses, estate administration costs and other permissible payments under the OFAC regulations. Dormant account. If a blocked account becomes dormant in accordance with the state s Unclaimed Property Act, the Credit Union shall not release the funds to the appropriate state agency unless the agency confirms that it has the required OFAC license. Safe Deposit Box. The renter of a safe deposit box subject to blocking may only remove property from the box in the presence of a Credit Union officer who must take immediate possession of the property and place it in a blocked account under an appropriate designation. Account fees and charges. The Credit Union shall debit blocked accounts for normal account service charges. Upon advice of legal counsel, debits may be allowed for other expenses directly related to maintaining and handling blocked accounts. OFFICE OF FOREIGN ASSET CONTROL Page 4
(12) False Positive Matches. To further demonstrate OFAC compliance, Credit Union shall maintain a list of all false positive matches it makes to help identify future false positive matches. (13) Recordkeeping. Retention Period. The Credit Union shall keep a full and accurate record of each blocked account, blocked payment or transfer for at least five years after the date of the transaction. For property blocked or funds transfers retained pursuant to the OFAC regulations, the Credit Union will keep a full and accurate record available for examination for the period of time that such property is blocked and for at least five years after the date such property is unblocked. OFAC requests. At the request of the Director of the OFAC, the Credit Union will furnish information or reports relative to any transaction or property subject to the OFAC regulations (14) OFAC Violations. The Credit Union shall contact its legal counsel immediately if it detects a violation or believes that it may have violated OFAC regulations. OFFICE OF FOREIGN ASSET CONTROL Page 5