The banking, credit union and money business sectors have always been subject to particularly close scrutiny and restrictive regulation for anti-money laundering, anti-bribery and other practices. However since the financial crisis, and in some measure in response to popular outcries, government has increased the pressure with more regulations, and more and more public investigations and settlements.
With revenues down, and demands for increased compliance up, balancing compliance and due diligence obligations with market realities has become increasingly difficult.
Financial institutions are required to monitor all transactions executed by or via them to identify those that involve any entity subject to OFAC sanctions. According to the requirements of federal statutes and specific sanctions, in most cases, deposits and funds should be accepted then 'blocked' or 'frozen' to ensure funds cannot be withdrawn. In some instances transactions must instead be rejected.
Regulations also require screening of customer databases against the frequently updated OFAC list for potential matches to terrorists, drug traffickers and other sanctioned entities.
Transactions that are Subject to OFAC
All of the following types of financial transactions should be reviewed for OFAC compliance:
- Deposit (checking & savings) accounts
- Credit Cards
- Wire transfers
- ACH transfers
- Lines of credit
- Trust accounts
- Loan payments
- Letters of credit
- Currency exchanges
- Safety deposit boxes
- Depositing or cashing checks
- Guarantors and collateral owners
- Money orders or cashier's checks
In addition, the names of all persons in a transaction should be verified against the list of individuals, entities, and the geographical locations identified by OFAC:
- Collateral Owners
- Guarantors / Cosigners
- Receiving Parties
- Sending Parties