How to Avoid OFAC Sanctions Violations

By Brett Melson Wednesday, June 24, 2009

There are literally hundreds of different bureaucratic agencies within the Federal Government and most of them have three or four-letter abbreviations. Every entrepreneur knows the IRS and the USPS and most will be able to recite the full names for the FBI, NASA, INS, FDIC, DEA, NLRB and SEC. The question is: How many know what the OFAC agency regulates and what the SDN list they publish has to do with YOUR company?

OFAC, otherwise known as the Office of Foreign Assets Control, is an agency that has been in existence since 1950, but has only hit the front pages since the attack on the World Trade Center on September 11, 2001. Many entrepreneurs, small and medium sized business executives are not familiar with the organization or the list they publish known as the SDN list, which stands for Specially Designated Nationals.

According to the Official OFAC website:

“The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States.”

Civil penalties for working with restricted countries or individuals include fines that can be as low as $395.25 levied on an individual who allegedly purchased Cuban-origin cigars offered for sale on the internet. (Cuba is a restricted country so purchasing anything from Cuba or selling anything to Cuba is an offense.) There can be pretty hefty fines also, as Gate Gourmet, Inc. found out in 2008 when it was hit with a $581,900 settlement for supplying catering services to Air Cubana Airlines over a three year period. In some cases, criminal violations could land top executives of offending companies in jail.

A list of all violators is published every month along with the penalty imposed. The various penalties levied upon individuals and companies (some of whom self reported and others who were not aware that they or their company was breaking the law) are available to the public. Many of the top companies in the world made the list and paid the price, and also a lot of unsuspecting, and maybe naïve, entrepreneurs who stepped across the line due to ignorance of the law.

No company, large or small, in global or internet commerce can afford to simply hide their head in the sand and pretend that this does not pertain to them. Every company should have a compliance program in place to make sure that the company is not inadvertently violating Federal laws.

There are several good OFAC compliance companies and software programs that can scan your database for a potential match to keep your company in compliance. You can also got the DIY route by going to the OFAC website and downloading the available lists and checking them against your database of clients, customers and accounts. You’ve got to check new customers before fulfilling the order and it’s a good idea to check your whole database once a month. Also, each time you check your database it’s best to download the freshest copy of the Treasury Department’s list, as it constantly changes.

Be proactive and take the necessary steps to protect your business. If you want more information about OFAC compliance issues for your business visit the OFAC website: https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/ques_index.aspx

*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.

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