The Office of Foreign Assets Control (OFAC), part of the U.S. Treasury Department, administers and enforces the United States’ trade and economic sanctions programs. The objective is to prevent business activity which directly or indirectly finances terrorist, narcotics, or human trafficking activities. OFAC regulations apply to all U.S. citizens and permanent resident aliens, all persons and entities within the U.S. law and their foreign branches.
The regulations prohibit doing business with anyone included on the lists maintained by OFAC including (i) individuals and entities designated as “Specially Designated Nationals” (SDNs); and (ii) banned countries. The SDN List is updated regularly and can be searched via the U.S. Treasury’s website: https://sanctionssearch.ofac.treas.gov/
In order to ensure compliance, law firms and businesses should check the names of potential and existing customers against the SDN List on a regular basis. If a valid match is determined, OFAC should be contacted as required by law. There are many OFAC reporting and record keeping requirements with which to comply. Failure to do so can result in stiff penalties.
In addition to OFAC regulations, financial organizations are governed by other anti-money laundering laws. Under the Bank Secrecy Act, the USA Patriot Act, and related anti-money laundering laws, banks must develop and maintain risk-based anti-money laundering, customer due diligence, and customer identification programs. Banks must also screen customers against additional government lists and establish a suspicious activity monitoring process.