The Office of Foreign Assets Control (OFAC) administers a series of laws that impose economic sanctions against hostile targets to further U.S. foreign policy and national security objectives. US Sanctions are a collection of United States laws, which prohibit US Persons from conducting trade and financial transactions with certain countries, individuals and entities. There are two broad categories of sanctions: those specific to a country or geographic area; and those targeting individuals or organizations.
While OFAC is responsible for promulgating, developing, and administering the sanctions for the Secretary of the Treasury under eight basic statutes, all of the financial regulatory agencies cooperate in ensuring financial institution compliance with the regulations.
Financial Institutions have a responsibility to comply with all of the actions required by law to ensure compliance with U.S. Sanctions, which includes blocking, rejecting, processing and reporting transactions consistent with U.S. Sanction requirements. Financial Institutions should monitor all financial transactions performed by or through their institutions to detect those that involve any entity, person and/or country subject to OFAC laws and regulations. Financial Institutions should review their customer database to determine if accounts are maintained for persons or entities sanctioned by the U.S. Government. Failure to comply with U.S. Sanctions could expose the Financial Institution to adverse publicity, fines, or criminal penalties.
Financial Institutions should implement an OFAC Program which includes policies, procedures, internal controls and manual/automated mechanisms to ensure compliance with the regulations promulgated by the Office of Foreign Assets Control and to prevent the inadvertent violation of U.S. Sanctions, in day-to-day operations. An annual Risk Assessment, of a Financial Institution Products, Geographies, Customers and Transactions should be performed to identify any potential risk exposure to Sanction violations.
Elements of the OFAC Program should be circulated throughout the institution as well as incorporated within the Financial Institution respective department procedures. To ensure employee awareness of OFAC procedures, Financial Institution personnel should be trained annually regarding OFAC compliance procedures as OFAC violations will have serious consequences.