“Now, it is much easier to clear results and forward certain matches to my boss for further investigation. I like how we can add comments for each record.”
ANALYST, INSURANCE, LOS ANGELES
OFAC Case Study
Although this case is long on the books, it’s important in that it highlights the importance of OFAC compliance—even for organizations operating in industries, and dealing with goods or products, you wouldn’t necessarily think have an obligation to comply with OFAC laws and regulations.
On July 10, 2012, OFAC issued an Enforcement Information release whereby Great Western Malting Company of Washington agreed to pay $1,347,750.00 to settle apparent violations of the Office of Foreign Assets Control Regulations. The apparent violations occurred when Great Western performed various back-office functions for sales by a foreign affiliate. The goods at issue were non-U.S. origin barley malt.
In the words of OFAC, the $1,347,750.00 settlement amount was ‘lenient,’ reflecting their consideration of the following facts and circumstances:
- Great Western is a large, sophisticated company;
- Great Western did not have an adequate OFAC compliance program in place at the time of the violations;
- Some of the violations involved transactions with Specially Designated Nationals;
- Other violations involved transactions which used an SDN vessel;
- Great Western had no prior history of OFAC violations;
- The company substantially cooperated with OFAC; and
- If the subject goods had been shipped from the United States, they would have been eligible for a license.
This recent settlement gives us number of important takeaways about OFAC compliance:
All Companies are at risk under OFAC
All companies should assess their OFAC risk exposure against their current and foreseeable business operations. It’s a myth that only companies dealing with controlled goods are at risk.
An OFAC Compliance Program is Essential
OFAC’s settlement guidelines clearly state that a compliance program can be the most significant mitigating factor (if there is one in place) or the most significant aggravating factor (if there is not one in place) in adjusting penalty amounts.
Large Companies need especially Robust OFAC Compliance Programs
The Great Western settlement also implies that large, sophisticated U.S. entities—especially—should have robust OFAC compliance programs.
Pay Attention to both types of OFAC Sanctions: Country and Entity
OFAC sanctions programs are directed at countries as well as designated persons or entities from those countries as well as other jurisdictions included on the SDN List. Therefore, an effective screening compliance protocol should include both a jurisdictional check and a review against the SDN List.
Facilitating a Transaction is also an OFAC Violation
OFAC sanctions programs not only target direct transactions with embargoed countries and persons, they also prohibit transactions whereby a U.S. company facilitates or aids a transaction involving an embargoed country or person. The facilitation does not need to be material or significant—even minor or indirect actions that support an unlawful transaction could constitute prohibited facilitation.
Voluntary Disclosures can reduce penalties
Making a voluntary disclosure of embargo violations to OFAC can help significantly reduce penalties and help mitigate the damages associated with the illegal conduct. Disclosures are not the easiest thing for a company to do, however, a robust compliance program must call for them.
If it could be Legal, obtain an OFAC License
The fact that a transaction could be appropriately licensed by OFAC does not relieve U.S. companies from actually obtaining a license for the transaction. There is no “would have been eligible for a license” license exception under OFAC regulations.