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OFAC Enforcement and Compliance

RC: What do you believe are the key trends and issues that have arisen in connection with Office of Foreign Assets Control (OFAC) enforcement and compliance over the last 12 months or so?

The Russia/Ukraine related sanctions have had a significant impact because so many companies are engaged in business – direct and indirect – in Russia, and the rapid escalation of the sanctions has challenged even the most proactive OFAC compliance programs. The Russian sanctions have targeted the primary financial institutions in Russia, so even incidental transactions involving payments or financing by or through sanctioned banks create compliance challenges. The Sectoral List Sanctions complicate matters by listing a number of Russian entities with which US persons are prohibited from engaging in certain dealings in debt and equity. Additionally, in August 2014, OFAC issued updated guidance that applies to all of its sanctions programs, not just Russia/Ukraine. That guidance served to widen the prohibition against US persons dealing with any firm owned 50 percent or more by any combination of Specially Designated Nationals and Blocked Persons (SDN) in the aggregate. Previous guidance stipulated that companies owned 50 percent or more by any single SDN, are considered themselves to be SDNs. The updated guidance complicates compliance, because US firms must now try to ascertain and calculate aggregate SDN ownership.

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