October 4, 2022

Volume XII, Number 277


October 03, 2022

Subscribe to Latest Legal News and Analysis

OFAC Crystalizes Its Expectations for Economic Sanctions Compliance Programs

On May 2, 2019, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) published A Framework for OFAC Compliance Commitments, which details more than 10 pages of long-standing OFAC practices on corporate economic sanctions compliance programs. With this publication, companies operating internationally are now on notice that compliance program elements that used to be simply “best practices” guidance will now be expected by OFAC. With the recent strengthening of certain sanctions regimes in countries such as Iran and Venezuela, the release of the guidance is both timely and telling. Companies – both U.S. and non-U.S. – conducting international business should take note and ensure their existing compliance programs include OFAC-enumerated elements.

Further, this guidance is relevant for both U.S. and non-U.S. entities, as in certain instances, U.S. sanctions can reach even wholly non-U.S. entities and individuals. For example, European companies engaging in business with Iran may be subject to U.S. sanctions measures (so-called “secondary sanctions”), or a non-U.S. bank that is processing payments from a sanctioned country may face enforcement actions for dollar-denominated payments or routing through the U.S. financial system.

Five essential compliance program components as identified in the OFAC framework are:

  1. Management commitment;

  2. Risk assessment (which can be considered broadly in three categories);

    1. Enterprise risk assessment,

    2. Due diligence on third parties, Know Your Customers (KYC),

    3. Mergers & Acquisitions (M&A),

  3. Internal controls;

  4. Testing and auditing; and

  5. Training.

There is no intent requirement for OFAC violations. They are strict liability offenses. Accordingly, every company engaged in international business dealings must adopt an effective compliance program to prevent and detect violations. Further, the existence of an effective compliance program, as highlighted by OFAC, may mitigate potential penalties in the event a violation occurs.

OFAC expects that companies discovering sanctions violations – even if the violations are inadvertent – should be able to point to an existing, effective compliance program to demonstrate that the impact of the violations was limited and the violations were detected quickly, and hence could be remediated quickly.

By contrast, a company without an effective compliance program facing an OFAC enforcement action may find the violations are treated by OFAC as egregious, and the lack of compliance program may serve as an aggravating factor in the calculation of monetary penalties.

The factors highlighted by OFAC are consistent with elements of effective compliance programs in other risk areas. For example, as reported in the GT Alert, “New DOJ Guidance: What Is Your Compliance Program Worth?”, the U.S. Department of Justice recently published an updated version of “The Evaluation of Corporate Compliance Programs,” which provides guidance on how DOJ prosecutors may view corporate compliance programs in other risk areas like AML or anti-corruption, and also highlights the importance of senior management commitment and regular risk assessments. However, it is important that the elements highlighted by OFAC be deployed and addressed with subject-matter expertise that is sanctions-focused. For example, AML or anti-corruption compliance risk assessments are unlikely to detect and address economic sanctions-related compliance with the attention and specificity expected by OFAC. Furthermore, unlike AML and anti-corruption laws, OFAC laws and regulations are often changing and very dynamic. So, what constituted an OFAC violation in the past may no longer be impermissible, and what was permissible in the recent past may now violate U.S. sanctions.

It is critical for businesses operating internationally to determine their sanctions risk profiles (under U.S. and other applicable laws) and design a sanctions compliance program to address the risks inherent to the business, as well as those presented by the rapid pace of regulatory changes in the sanctions space. 

©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume IX, Number 126

About this Author

Kara Bombach, Greenberg Traurig, Washington DC, International Trade and White Collar Defense Attorney

Kara Bombach assists companies to lawfully export goods, technology and services around the globe. She places significant emphasis on helping clients achieve practical, workable solutions to complex regulatory situations arising under anti-corruption and anti-bribery measures (U.S. Foreign Corrupt Practices Act (FCPA) and OECD Convention), export control laws (EAR and ITAR), anti-boycott laws, and special sanctions (embargoes) maintained by the U.S. government (OFAC and other agencies) against various countries (including Iran, Cuba and Sudan), entities and individuals....

Cyril Brennan, Greenberg Traurig Law Firm, Washington DC, International Trade Law Attorney

Cyril (Cy) Brennan focuses his practice on international trade regulation and compliance, with an emphasis on U.S. export controls and economic sanctions. Cy handles matters regarding the International Traffic in Arms Regulations (ITAR), the Export Administration Regulations (EAR), U.S. sanctions programs administered by the Treasury Department’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s anti-boycott regulations. In addition, he represents clients before the Committee on Foreign Investment in the United States (CFIUS), and advises clients...

Renee Latour, Greenberg Traurig Law Firm, Washington DC, Corporate Law Attorney

Renee A. Latour focuses her practice on international trade regulation with an emphasis on compliance with U.S. export controls and economic sanctions. Renee assists clients on matters related to international trade that arise under the jurisdiction of various U.S. governmental agencies, including the Departments of Commerce, State, Treasury, and Defense. She advises on U.S. export control laws, anti-boycott laws and special sanctions maintained by the U.S. Government against various countries including Iran, Cuba and Sudan.

Renee also assists...

Sonali Dohale, Greenberg Traurig Law Firm, Washington DC, Environmental and International Trade Law Attorney

Sonali Dohale focuses her practice on compliance counseling, environmental due diligence and environmental litigation under state and federal statutes. Sonali’s experience at government regulatory agencies and her background in civil and environmental engineering help give her insight into both the legal and technical challenges faced by her clients.

In addition, Sonali assists clients engaged in international trade with a variety of federal regulatory issues, including matters related to the International Traffic in Arms Regulations (ITAR), the...