The Office of Foreign Asset Control (OFAC) released a document called A Framework for OFAC Compliance Commitment. This document establishes certain commitments that OFAC believes are necessary to have a robust sanctions compliance program.

Elements of an Effective Sanctions Compliance Program

OFAC states that a sanctions compliance program should be based on five essential elements:

  • Management commitment
  • Risk assessment
  • Internal controls
  • Testing and auditing
  • Training

OFAC states that it is possible for an effective compliance program to mitigate the civil penalties for apparent violations of US sanctions.

Management Commitment

The first element of an effective sanctions compliance program is management commitment. OFAC expects senior management to be committed to ensuring compliance with US sanctions. It is important for senior management to review and approve their company’s or organization’s sanctions compliance program.

OFAC wants to see reporting between senior management and lower-level management and meetings between the two for ensuring ongoing compliance with US sanctions. Additionally, OFAC would like to see a sanctions compliance officer dedicated to ensuring ongoing compliance with US sanctions. OFAC also seeks an understanding by the compliance officers of the risks involved with regards to the technology systems in the organization and US sanctions.

Senior management should also promote a culture of compliance in the organization and demonstrate that any apparent violations of the US sanctions are serious and should be addressed.

Risk Assessment

OFAC wants to see entities take a risk-based approach with their sanctions compliance program. What works for one company may not work for another, depending on the industry and customers the entity deals with. When conducting a sanctions risk assessment, it is important to identify potential risks that may cause sanctions violations to occur. A comprehensive risk assessment program should prevent or extremely limit any potential violations from occurring.

OFAC also believes entities should have an onboarding process for their customers, including a  Know Your Customer (KYC) form. Additionally, OFAC wants entities to conduct a thorough risk assessment when a merger or acquisition takes place and update the risk assessment as the business develops. This can be done through recurrent tests and audits.

Internal Controls

Effective sanctions compliance programs should have certain internal controls guided by  OFAC regulations. A sanctions compliance program should also keep up with relevant developments in the sanctions involved and the SDN list. Below are some components of robust internal controls:

  • Witnesses must be identified and addressed in advance of any potential violations
  • A well-designed and well-implemented sanctions compliance policy, written and codified in the corporate bylaws
  • Internal enforcement policies that produce the best results in audits and internal controls
  • Keeping up with record-keeping policies as recommended or as required by sanctions programs
  • Taking immediate action to fix any weaknesses or holes in existing sanctions compliance programs

Testing and Auditing

OFAC recommends testing and auditing the various different parts of the sanctions compliance program as well as the organization. OFAC wants entities to ensure that red flags are addressed from the bottom up as well as the top down. This testing and auditing should identify weaknesses and deficiencies. OFAC seeks a commitment from management and auditors to address the flaws found in the tests and audits.

Training

OFAC wants entities to implement and maintain adequate training programs based upon the risk assessments and profile of the organization. Training can be customized for sectors and employees in the entity that may be a higher risk of potential sanctions violations. Companies should fully commit to adequate training so that employees are adept at preventing sanctions violations from occurring in the organization.

How an OFAC Sanctions Compliance Attorney Could Help

An OFAC sanctions attorney could help draft a sanctions compliance program or ensure an existing policy meets OFAC’s standards. This can a business or organization avoid sanctions violations and mitigate any risks involved with their ongoing business dealings. A US sanctions attorney can also update and audit the company on any potential sanctions-related issues. For help with your compliance program, schedule a consultation with a knowledgeable OFAC attorney.