It is important for US companies to have their own compliance program for sanctions in which their employees and management are trained to limit any exposure to sanctions liability. OFAC expects a company to have a compliance program when they:
- Engage in many transactions or a general course of business that has a nexus to sanctions programs
- Engage in business in a region with a heightened risk of sanctions violations
- Engage in international business at a large volume
- Work with a customer base changing due to branching, merger, or acquisition in the domestic market
- Work with a moderate or large amount of high-risk customers
- Offer electronic products and services
- Have had past encounters with OFAC
Here is some information on building a compliance program and the different elements that OFAC expects to be included.
Risks of Not Having a Compliance Program
Sanctions violations are strict liability offenses. Accordingly, intent or lack of intent to violate the law, or lack of awareness of the law is not a defense when it comes to a sanctions violation. For this reason, it is critical for companies to take steps to protect themselves as much as possible. This is different from other types of regulations and federal laws that have intent requirements.
Companies are rightfully hesitant to do business in areas with a nexus to sanctions. Many times individuals trying to evade the sanctions work in different parts of the world.
Employees must be trained on the proper procedures for screening the names of parties and understand the way that the sanctions apply to different types of transactions so that they can take steps to prevent engagement in transactions that are prohibited. The employees can also follow any obligations they have under the law as a financial institution or otherwise to block property and/or accounts of sanctioned individuals.
Expectation for Sophisticated Actors
The Office of Foreign Assets Control requires full compliance with OFAC regulations which are dynamic and complex. However, OFAC does not require companies and persons to have compliance programs. In spite of this, OFAC considers persons who conduct large volumes of business with international or otherwise high-risk customers to be sophisticated actors. Sophisticated actors are held to a higher standard under the OFAC enforcement guidelines.
In fact, OFAC has a set of Sanctions Enforcement Guidelines they use to calculate the way they enforce the violation of sanctions. Being a sophisticated actor is one of the prominent metrics used to determine the level of penalties an individual or entity faces. For that reason, OFAC’s enforcement calculus considers a number of general factors when determining the appropriate action and civil and/or criminal penalties in cases involving apparent violations of OFAC economic sanctions.
The Office of Foreign Assets Control deals with civil penalties for sanctions violations but they may work hand-in-hand with the Department of Justice or other agencies in the federal government or in the state governments to pursue criminal charges and penalties for sanctions violations.
Contacting a Lawyer
An OFAC compliance lawyer will work with clients to develop compliance programs. If you think that some of the steps described here may be too much for the size of your company that currently operates overseas, a compliance program can be tailored to the size and nature of your business. You should work with experienced counsel who can create a compliance program for you that is appropriate for your company’s needs.