Complying with the legal obligations imposed by the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) is one of the most difficult compliance projects in the country. The Office of Foreign Assets Control (OFAC) is in charge of enforcing American economic and trade sanctions to protect national security goals and foreign policy objectives regarding targeted foreign countries, terrorists, international narcotics traffickers, foreign sanctions evaders, and other threats, so current events can drastically alter your compliance demands in a matter of hours.
Here is what Dr. Nick Oberheiden, founding partner of the national OFAC defense firm Oberheiden P.C., thinks that companies need to know for their company's OFAC compliance program for 2023.
Now More Than Ever: Constantly Monitor the Sanctions Lists
Monitoring the Office of Foreign Assets Control lists of companies and individuals who are under U.S. economic and trade sanctions based on foreign policy objectives is possibly the most fundamental aspect of OFAC compliance programs in companies. You cannot avoid trading with the people and entities on these lists if you do not know who is on them. And OFAC regulators do not care that you did not know that your trading partner was subject to sanction laws.
However, the massive amount of global upheaval that we have seen in the past year has radically sped up the rate of additions to the U.S. sanctions programs listings. In peacetime, the sanctions lists tend to get updated every week or so. Now, with conflict raging across the globe, the lists are getting updated on a nearly daily basis.
If you have not already signed up to the OFAC RSS feed or subscribed to get email updates of OFAC’s recent actions, now is the time to fix that and add it to your own compliance program.
Do Not Overlook Seemingly Minor Conflicts Outside of Ukraine
It has been over a year since Russia invaded Ukraine, and news of the conflict is still dominating the front pages of the news. That ubiquitous coverage and the prominence of this particular conflict has served as a near-constant reminder for American companies to check and double-check their business connections to ensure that their Russian-based trading partners have not been sanctioned.
However, the wall-to-wall coverage that the war in Ukraine has gotten has also pushed other pressing global conflicts into the back pages of the news. There, they are easy to overlook. For example, in May alone, recent actions to the OFAC sanction lists have dealt with:
- The growing civil war in Sudan, which has resurrected the still simmering conflict in the Darfur region
- Latent effects of the Syrian civil war
- Ongoing sanctioning of North Korea
- Drug-related violence in Venezuela
To maintain an effective OFAC compliance program with their OFAC regulations obligations, companies need to keep their ear to the ground and not get completely distracted by the loud noises that they hear; the quiet conflicts are easy to forget about, but they can still lead to serious repercussions if they produce an economic sanction that your company ends up violating. The penalties that your company could face would still be similar, no matter where the violation occurs.
Cryptocurrencies Are Not as Untraceable as Advertised
Another important thing for companies and individuals to keep in mind when they conduct international business is that, if anything has been learned about digital assets in the last year, it is that cryptocurrency is very, very traceable. The marketing that had claimed that Bitcoin and other virtual currencies were almost impossible to trace through the blockchain, and that this made them ideal for people who were concerned about keeping their transactions private, has authoritatively been proven to be false by U.S. law enforcement agencies. While there was a time when this played true, that time was short. Investigators seem to have discovered the key to tracing any virtual currency they want, and appear to be able to do it across trading platforms. This has led to numerous instances of criminal charges being filed for a variety of misconduct, from a range of securities fraud cases to white collar crimes like traditional embezzlement.
For OFAC compliance, this means that trying to evade economic sanctions by merely channeling the assets through a digital coin is not a good way to avoid prosecution.
Remember to Monitor Business Partners for Suspicious Activities
Global turmoil does not just lead to OFAC updating its lists of sanctioned people and entities; it can also alter the business associates and beneficiaries that stand behind a company’s known business partners in ways that can implicate international economic sanctions. No matter how familiar a company is with an international business partner, they should still monitor that partner’s associates for signs that they are evolving in ways that might violate OFAC sanctions.
This is particularly important to do in 2023 because of all the new turmoil in the world and the number of recent additions to OFAC’s lists of sanctions. When targets get sanctioned by the U.S., they frequently turn to their network of friends and associates to try to evade the sanctions by using intermediaries to do business for them on their behalf. Particularly when the subject of the economic sanction is a powerful individual or company, those networks can extend very wide. Worse, they can grow after the sanctions go into effect as the target uses their power to coerce and pressure others into doing their bidding, even when those other parties have never been affiliated with the target, before.
If this happens to your company’s foreign business partner, it can be difficult to notice. However, you are still expected to do your due diligence and ensure that your foreign, and even your domestic, business dealings do not benefit someone on the sanctions list.