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How to Comply With OFAC Sanctions -Tips to Protect Your Business From Sanctions

updated:
10.7.21
How to Comply With OFAC Sanctions -Tips to Protect Your Business From Sanctions

OFAC Definition and Purpose

What does OFAC stand for? It stands for the Office of Foreign Assets Control (OFAC), a division of the Treasury Department. OFAC administers and enforces US government sanctions against targeted nations, entities, and individuals in support of US policy goals. Sanctions might include trade prohibitions, freezing of assets, or other restrictions.

OFAC Compliance

What are transactions subject to OFAC regulations? All U.S. persons must comply with OFAC regulations, including sanctions against countries and directed sanctions imposed against specifically identified individuals and entities. For example, OFAC maintains a list of Specifically Designated Nationals (SDNs), and US Persons are generally prohibited from dealing with SDNs.

You can, however, apply for a license that will give you special permission to engage in transactions otherwise prohibited by OFAC sanctions. OFAC offers two types of licenses--general and specific licenses. The rules on OFAC licenses can get complex, and you will probably need an experienced lawyer to help you complete the OFAC licensing process.

General Licenses

An OFAC general license represents a general regulatory exception to OFAC sanctions. These permissions are contained within the regulations themselves. There is no need, then, for you to apply for a separate license. All you need to do is to make absolutely sure that the transaction you are contemplating falls clearly within the terms of the general license; these general licenses often contain complex criteria and require detailed analysis.

An example of a general license contained within existing regulations concerns a US citizen who receives an inheritance from Iran. Under the general license, the US citizen may sell assets inherited in Iran and transfer the proceeds to the United States, subject to various requirements. You do not need to file an application to take advantage of a general license.

Specific Licenses

In contrast to a general license, a specific license is likely what most people think the word “license” refers to. It represents OFAC’s permission to engage in a specific transaction that sanctions would otherwise prohibit. You need a specific license when you cannot undertake a transaction that is prohibited by sanctions and no general license is applicable. In order to obtain a specific license, you must file a detailed application with OFAC.

One often-overlooked reason to seek an attorney to help you prepare an application for a specific license is that the information you reveal on the application might reveal that your company violated sanctions regulations in the past. Such a revelation could trigger an investigation and potential penalties.

Congress has granted OFAC the authority to issue specific licenses in many but not all situations. Under certain circumstances, even OFAC lacks the authority to permit a transaction prohibited by US sanctions.

How Do You Protect Your Business From a Violation of OFAC Sanctions?

Sanctions Compliance Plan

If your company does business in ways that might place it at risk of violating applicable sanctions, you need to take a proactive approach to compliance with sanctions regulations. The consequences of a violation are too serious to be ignored. Experience has demonstrated that the best approach to compliance is to develop a specific company compliance plan in advance.

In a compliance plan, you set out specific procedures that your staff must follow. These procedures define compliance procedures, including due diligence, investigation, remediation, and training procedures.  Your company‘s sanctions compliance plan should include a strong educational component. It should include thorough training for employees who might become involved in a sanctions-related transaction.

If your company already has a compliance plan in place, we can audit it and provide suggestions for any necessary revisions. If you don’t already have one, we can help you create one.

Training

You need to provide sanctions compliance training to any employee who might encounter a transaction implicating OFAC sanctions. OFAC compliance training offers your company the following advantages:

  • It ensures that your employees thoroughly understand OFAC sanctions requirements, that is, the substantive law on sanctions-related transactions.
  • It provides a comprehensive explanation of your company’s individual procedures.
  • It demonstrates to government officials that your company is serious about OFAC compliance.
  • It can help you avoid costly fines and even criminal sanctions against both your company and its employees by avoiding violations in the first place.

Your OFAC training program can be tailor-made for your company’s specific requirements, and it should include both testing and certification requirements. Our attorneys can provide your company with this training.

Verifying Transactions

It is critical that you realize which transactions raise OFAC issues and which do not. One violation could raise serious issues for your company years down the road. We can examine your historical transactions to determine whether they raise OFAC compliance issues.

Voluntary Disclosure of Information

Perhaps your company has violated OFAC sanctions requirements recently or at some time in the past. This is a potentially huge problem for your company due to significant potential penalties.

In many cases, the optimal solution to this kind of problem is a Voluntary Self-Disclosure (VSD), in which your company voluntarily provides OFAC with information about the violation. VSD is considered a mitigating factor by OFAC when calculating penalties under its Enforcement Guidelines. Although OFAC is not likely to reduce the penalty to zero, a VSD  might very well reduce the penalty to a level significantly below what it otherwise would have been.

Mitigation and Adjustment

If your company does get into trouble with OFAC, we can help you dig your way out. We can help you:

  • Manage voluntary self-disclosures;
  • Negotiate penalties with OFAC; and
  • Build safeguards into your compliance system that will prevent future violations.

Denver OFAC Compliance Lawyers at Your Service

If you have any doubts about your compliance with OFAC rules or need OFAC licenses, please contact the OFAC compliance lawyers at Sequoia Legal by calling (303) 476-2851 or contacting us online.

Written by:

Hunter Boone

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