Financial transactions and trade with certain foreign countries, regimes, businesses, or individuals are subject to economic sanctions administered by the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC.) Those involved in practices which threaten to undermine or damage U.S. foreign or economic policy or the overall security of the nation are subject to economically damaging U.S. sanctions.
Before engaging in international business and trade matters, it is advisable to consult with an OFAC attorney or OFAC’s website to determine if any proposed transaction is prohibited by law. All U.S. citizens, businesses based in the United States., and U.S. persons located abroad are subject to these trade and economic sanctions. Those which must maintain compliance include non-governmental organizations (NGOs) and nonprofit organizations (NPOs) as well.
Engaging in transactions which violate OFAC regulations can result in serious civil and criminal penalties, which may include fines, blocked assets, and imprisonment. Ignorance of the law does not absolve one of liability, but by contacting a legal professional one may be able to prevent or remedy an OFAC violation.
NGO and Not-for-Profit Licensing and Registration
Taking on a charitable role in foreign countries can be complex. While the intentions of many charitable organizations is in the right place, it is equally important to make sure the funds and donations make it to the right place as well – and by the right means. When administering humanitarian aid to a sanctioned country, NGOs and nonprofit organizations must comply with OFAC regulations. Such organizations may require OFAC licensing in order to legally follow through with foreign aid and charitable efforts.
Through the U.S Treasury Department’s website, one can find out more about the appropriate steps necessary to secure NGO and NPO licensing and registration for humanitarian aid in Sudan, Burma, Cuba, and Iran.
In applying for the necessary OFAC approval, one must provide specific details regarding those involved in the transaction and the amount, type, and purpose of the proposed aid. For example, approval for aid in Cuba requires the following information be submitted to the Office of Foreign Assets Control:
- Name and contact information, along with similar charitable work experiences;
- Identification of the organization, including name and type of organization along with mission statement or explanation of objective;
- Identification of the nature of the project (i.e., medical, environmental, religious, etc.) and how it will benefit the people;
- Identification and count of those to be involved in the aid, and to what degree each person is to assist in the project, noting any specific qualifications;
- Estimated schedule for those involved and the expected duration of the work;
- Identification of the foreign contact and contact information, whether individual or organization, that will provide assistance during the course of the project;
- Identification of governmental contacts and necessary foreign approval or permitting;
- Current license number for license renewal requests; and
- A signature by an authorized individual certifying that all enclosed information is valid and accurate.
OFAC will review such information to determine the legitimacy of the proposed work, and to ensure the proposed transaction is consistent with current U.S. foreign policy and national security objectives, before authorizing the transaction.
OFAC Risk Assessment
OFAC has developed a matrix to assist charitable NGOs and nonprofits in determining the level of risk associated with various forms of giving. The more specifically the funds or goods are allocated, the less risk there is of having such items fall into the wrong hands and be utilized inappropriately.
In low risk transactions, the funds or goods have a specific purpose which is thoroughly spelled out in a written disclosure. Medium risk transactions provide funds with a limited specificity about their purpose. High risk transactions provide funds for a general purpose with no specific disclosure regarding the application of the funds.
When handling financial matters in foreign countries, due diligence is required to ensure compliance with OFAC sanctions. The risk matrix provided on the U.S. Treasury Department’s website can help NGOs and nonprofit organizations analyze their charitable giving to eliminate the propensity for a misallocation of funds by sanctioned countries and entities. Further consultation with an attorney who has experience with OFAC sanctions and regulations is also advisable.
OFAC Compliance Assistance for NGO and Nonprofit Organizations
Failure to comply with OFAC regulations can result in serious consequences for those involved in foreign transactions, even when the intent is to provide aid through charitable means. In fact, the U.S. has regularly investigated and prosecuted sanctions and other violations committed by Islamic charities and those who donate to Islamic charities. Due diligence, proactive compliance measures, and up-to-date legal counsel will all help protect charitable organizations and donors from inadvertently violating OFAC sanctions.