OFAC PUBLISHES BEST PRACTICE GUIDE FOR U.S. SANCTIONS COMPLIANCE
June 19, 2019
On May 2, 2019 the Treasury Department’s Office of Foreign Assets Control (OFAC) published “A Framework for Compliance Commitments.” The Framework provided informal guidance on how companies should maintain risk-based sanctions compliance programs (SCPs) to ensure compliance with the U.S. government’s economic and trade sanctions against countries such as North Korea, Cuba, and Venezuela. A strong SCP generally implements five key principles: (1) management commitment, (2) risk assessment, (3) internal controls, (4) testing and auditing, and (5) training. A company’s diligent implementation of a compliance program can be a positive factor to mitigate OFAC civil penalties if a sanctions violation does occur.
The Framework suggests performance criteria to measure implementation of each of the five principles. For example, “management commitment” can be assessed in terms of senior leadership support, delegation of SCP authorities to point persons, and producing a culture of compliance within the company. “Risk assessment” entails a level of due diligence appropriate to a company’s size and resources, along with its level of foreseeable risk (e.g., transactions with counterparties who might trade with sanctioned countries require stronger due diligence). “Internal controls” and “training” speak to the need for companies to design SCP safeguard mechanisms, such as reporting processes and adequate oversight, and also to ensure that employees are regularly informed of and understand their SCP responsibilities.
OFAC noted that, while companies are not formally required by law to have an SCP, the likelihood of sanctions violations is higher when a company whose business presents some regulatory risk does not implement a program. An SCP tends to help a company think through possible issues in advance, such as misunderstanding OFAC regulations or inadequate or decentralized due diligence. If you have questions about OFAC regulations or designing and implementing an SCP, please let us know.
If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com or 202-659-6622); Drew Derco (dderco@eckertseamans.com or 202-659-6665), or Alexander Matthews (amatthews@eckertseamans.com or 202-659-6633).
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