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Lessons Learned from OFAC’s Rapidly Increasing Enforcement Response

Last month, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) concurrently announced Findings of Violation against two insurance companies. According to the announcements, AXA Equitable Life Insurance Company issued health insurance policies to designated individuals. A subsidiary of Humana, Inc.serviced these policies as a Third Party Administrator in violation of sanctions regulations.

While there is no direct monetary penalty from a Finding of Violation, businesses are nonetheless advised to modify their compliance programs in response to OFAC’s articulations of compliance expectations. The agency will likely determine that a significant civil monetary penalty is appropriate for similar future apparent violations by other businesses.

OFAC typically issues Findings of Violation to promote certain aspects of compliance. The agency’s increasing issuance of Findings of Violation makes failure to heed these warnings especially reckless. To date, OFAC has only issued nine such penalties, but seven of these announcements occurred in the past year.

Findings of Violation Compliance Failures

The compliance failures giving rise to Findings of Violation occurred as a result of internal controls and compliance training that were inadequate for mitigating inherent risk.  Failures in the testing and auditing functions of compliance programs in some cases led to violations that continued for years.

  • The Findings of Violation against AXA and Humana highlight the need to screen both direct and third-party customers.
  • The apparent violations described in the July 2016 penalty against Compass Bank arose from failure to screen dormant accounts.
  • In March 2016, OFAC issued a Finding of Violation against MasterCard International Incorporated alleging that the company failed to report blocked Iranian accounts.
  • The October 2015 announcement against BMO Harris Bank NA serves as a warning that false hit lists (alternatively referred to as “good guys lists,” “whitelists,” or “exemption lists”) require regular review and revision.
  • Failure to properly train a sales manager responsible for the Middle East and North Africa led to apparent violations described in the February 2016 Finding of Violation againstJohnson and Johnson (Middle East) Inc.
  • OFAC determined that the August 2015 Finding of Violation against Schlumberger Oilfield Holdings, Inc. was the appropriate enforcement response to apparent violations, because of the substantial parallel criminal fine and forfeiture.
  • OFAC issued an August 2013 Finding of Violation against VISA International Service Association to promote its reporting obligations.
  • In October 2010, OFAC determined that a Finding of Violation against Christ for All Nationswas the appropriate enforcement response after weighing the clear violation and the licensable, non-commercial nature of the conduct.

We will continue to monitor OFAC enforcement actions and publish updates as significant developments arise.

Copyright Holland & Hart LLP 1995-2022.National Law Review, Volume VI, Number 259
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About this Author

Jeremy Paner, Economic, Trade Sanctions Attorney, HOlland Hart Law Firm
Of Counsel

Mr. Paner is Of Counsel at Holland & Hart's Washington, DC office. His practice focuses on economic and trade sanctions compliance issues, in addition to general white collar criminal and regulatory investigations. Mr. Paner leverages his sophisticated governmental experience to deliver valuable risk analysis and compliance and avoidance advice to private clients.

Prior to joining Holland & Hart, Mr. Paner was the New York State Department of Financial Services appointed independent economic sanctions monitor of a major international...

202-654-6912
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