Besides certain business and legal risks associated with every company, there is compliance risk that can absolutely be mitigated; however, many organizations tend to oversee it. It is important to be vigilant about compliance with U.S. sanctions laws enforced by the Office of Foreign Assets Control (OFAC). Such “events” as OFAC Enforcement and Investigation may happen unexpectedly. At Sanctions Law Center, we ensure that your organization preempts any such potential risks efficiently and smoothly.
What does the Investigation Process look like?
When initiating an investigation, OFAC typically begins with a review of information related to transactions or activities that are viewed to be prone to sanctions violations. This review can include examining financial records, correspondence, corporate transactions and other relevant documents. If, in the course of such investigation, OFAC finds a potential violation, it may issue an administrative subpoena. We discuss administrative subpoena in more detail in this article. In short, through administrative subpoenas OFAC may gather further information and compel the organization to provide such documentation or testimony.
Throughout the investigation process, organizations can and should defend themselves. Therefore, consulting with an experienced legal counsel is essential to ensure that the organization’s rights are protected, and all potential risks of enforcement are mitigated to the extent possible. Lawyers at Sanctions Law Center assist clients in conducting internal investigations to be informed of all possible risks and have mitigation strategy which may include, among others, voluntary self-disclosure and preparing responses to any inquiries from OFAC.
What causes OFAC Investigation?
There are several channels through which OFAC may be informed about potential sanctions violations. The channels include voluntary self-disclosure, reports of rejected and blocked transactions and public information (for example, media reports and investigations).
During an internal investigation initiated by an organization itself, certain evidence of sanctions violations may be unfolded. It does not necessarily mean that the organization willfully or intentionally evaded sanctions regulations, instead it may be a result of poorly implemented compliance program or the absence of it. Regardless of the cause for sanctions violations, if the company identified that the violation already happened – it may share such information with OFAC in exchange for reduction of any potential penalty. If the company fails to do so – it also may be considered as an aggravated factor.
Whenever a U.S. financial institution (or any other U.S. person) blocks or rejects a prohibited transaction, it has an obligation to report such blocking or rejection to OFAC. This way OFAC may learn about potential involvement of an organization into sanctions violations. But it is still not the only way OFAC can learn about potential illegal activity. Financial institutions also submit reports in compliance with the relevant anti-money laundering regulations (for instance, Suspicious Activity Reports) which may unleash potential sanctions violations and give OFAC a reason to initiate an investigation against a company. Finally, other agencies conduct their independent investigations that could lead to uncovering sanctions violations. Thus, when deciding on whether your organization needs to conduct internal investigation, it is helpful to be aware of all the sources that may already have some information that has a potential to trigger OFAC investigation. Again, OFAC investigation is not yet an enforcement, however, if certain risks are overlooked, it may become a first stage of an enforcement action.
Why OFAC Investigations Matter?
One shall not underestimate OFAC investigations. When OFAC is “shows interest” in your organization, business operations, transactions, it can only mean that there was some trigger. Therefore, one needs to be prepared to handle such procedure. OFAC Investigation may further result into No-action letter, Cautionary letter, Settlement, or in severe penalties, including substantial fines and restrictions on business operations. Moreover, the reputational damage can have long-lasting effects and impact relationships with customers, partners, and government agencies.
That is why our OFAC Lawyers recommend to be proactive in the compliance efforts. Being proactive in compliance does not necessarily mean being overly compliant to the point where you cancel any transaction that have remote risk. However, understanding the risks associated with OFAC enforcement and investigations, implementing compliance programs that help mitigate the likelihood of violations, is crucial. This includes conducting regular risk assessments, providing employee training, and establishing clear protocols for reporting potential compliance issues.
What is OFAC Enforcement?
To ensure compliance with U.S. sanctions laws, Office of Foreign Assets Control take certain actions that are called “enforcement.” These may be:
- Civil penalties (meaning monetary penalties in most of the cases)
- Cease and desist orders
- License actions (OFAC may deny, suspend, modify, or revoke licenses)
- No action letters (if no sufficient evidence of a violation is available or if the conduct does not warrant an administrative response)
- Criminal referrals (any potential criminal violations may be referred to the Department of Justice (DOJ) for criminal investigation)
- Cautionary letters
- Findings of violation
How Our Firm Can Help with OFAC Enforcement and Investigations
At Sanctions Law Center, our OFAC Sanctions Lawyers are committed to guiding organizations through the complexities of OFAC enforcement and investigations. We provide strategic counsel to help businesses understand their obligations under U.S. sanctions laws. We assist clients in developing and implementing comprehensive compliance programs tailored to their specific needs.
If your organization is facing an OFAC investigation, we will work diligently to ensure that you are prepared. This includes conducting thorough internal investigations, compiling necessary documentation, and formulating a clear and effective response to OFAC inquiries. Our team is adept at negotiating with regulatory authorities, advocating on your behalf.
In addition to direct support during investigations, we offer compliance consulting designed to enhance your organization’s understanding of U.S. sanctions laws. These programs promote a culture of compliance and equip your team with the knowledge necessary to identify and address potential issues.