Why Every U.S. Business Needs to Proactively Manage OFAC Compliance
The following article originally appeared in the July 2010 issue of ABC-Amega's free client newsleter, "Credit-to-Cash Advisor". The OFAC (Office of Foreign Assets Control of the United States Department of the Treasury) administers and enforces U.S. government economic sanctions against countries and groups of individuals, including terrorists and narcotics traffickers. Brief History of OFAC
The U.S. Treasury Department involvement with sanctions began prior to the War of 1812, when it executed sanctions against Great Britain for harassment of American sailors. During the Civil War, the Treasury Department administered rules and regulations related to laws that prohibited transactions with the Confederacy. The immediate predecessor to OFAC was the Office of Foreign Funds Control (FFC), established in 1940 after the German invasion of Norway. Initially, the FFC's role was: (1) to prevent Nazi use of foreign exchange and securities holdings of occupied countries; and (2) to prevent forced repatriation of funds belonging to citizens of those occupied countries. After the U.S. entered World War II, the FCC blocked enemy assets and enforced prohibitions against foreign trade and financial transactions. In December 1950, following the entry of China into the Korean War, OFAC was established to block Chinese and North Korean assets subject to U.S. jurisdiction. Why Every U.S. Business Needs to Proactively Manage OFAC Compliance
Every U.S. person must comply with OFAC regulations. This includes citizens, permanent resident aliens, incorporated entities and their foreign branches. In some cases, such as sanctions against Cuba and North Korea, even foreign subsidiaries owned or controlled by U.S. companies must comply. The penalties for violation are program-specific. Criminal penalties include fines from $50,000 to $10 million and imprisonment from 10-30 years. Civil penalties range from $250,000 to $1,075,000 for each violation. Each U.S. Firm's Responsibility under OFAC
Each OFAC program has different prohibitions, depending upon specific U.S. foreign policy and national security goals. It's up to every company to be aware of prohibited activities which might relate to its business and to ensure that they are not doing business with the sanctioned countries or groups. (Note: it is possible to transact trade with some embargoed countries by obtaining a license from OFAC.) Countries with current sanctions and embargoes include: Belarus, Burma (Myanmar), Cote d'Ivoire (Ivory Coast), Cuba, Democratic Republic of the Congo, Iran, Iraq, Liberia, North Korea, Sierra Leone, Sudan, Syria, Western Balkans, and Zimbabwe. Other programs target individuals or entities that can be located anywhere or in multiple areas. Currently, these programs are related to foreign narcotics traffickers, foreign terrorists, and proliferators of weapons of mass destruction. (See Resources at the end of this article for links to specific information about all sanctions and embargoes.) U.S. companies should also check clients against the OFAC Specially Designated Nationals and Blocked Persons (SDN) list. U.S. persons are prohibited from dealing with these more than 6,000 companies and individuals around the world, which are owned, controlled by, acting for or on behalf of targeted countries. (See Resources at the end of this article for information on where to find the SDN list.) In both the cases of sanctions and embargoes, and the SDN list, OFAC's programs are constantly changing. Checking this information on a regular basis, therefore, should become a regular part of any business' operation. Resources for OFAC Compliance Office of Foreign Assets Control (OFAC), U.S. Department of the Treasury Frequently Asked Questions about OFAC: An extensive FAQ section on the U.S. Department of the Treasury web site OFAC Sanctions Programs: Provides specific detail about sanctions and embargoes. SDN Lists: Lists in .txt or .pdf formats and sorted by country or by OFAC Sanctions Program. Also provides the ability to get e-mail updates when the information changes. Determining if you have a valid SDN list match: In OFAC FAQs. OFAC Exporter Assistance Phone Line: 1-800-540-632 ***** We thank ABC-Amega Inc. for the above information, which was originally published in their client newsletter "Credit-to-Cash Advisor". ABC-Amega Inc. provides 1st and 3rd party commercial collection services since 1929, and collecting in more than 200 countries worldwide. For further information, contact info@abc-amega.com.
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