Mark Pestronk
Mark Pestronk

Q: In responding to a prospective corporate account's request for proposal, we came across this question: "Please describe your OFAC sanctions compliance program." What is OFAC, what is a sanctions compliance program, how should we have answered the question and what should we be doing to comply with OFAC requirements?

A: OFAC is the Department of the Treasury's Office of Foreign Assets Control. It enforces the government's programs that prohibit Americans from doing business with certain countries, organizations and individuals.

These OFAC programs are called "sanctions programs," and there are currently 37 programs that totally or partially prohibit you from having clients or suppliers in the affected countries or organizations.

So, if a client is from one of the countries for which an OFAC sanctions program applies, you need to read the specifics of that program to see whether you can do business with the client. Each sanctions program is different. For example, for Iranians, you can arrange travel for most non-governmental clients, but payment for their travel must not come from Iran.

In addition, OFAC prohibits you from doing business with individuals on the Specially Designated Nationals and Blocked Persons List (SDN List), which contains the names and aliases of some 6,500 people and companies worldwide, such as terrorists and drug cartels, regardless of what country they are in.

For very small businesses, the heart of an "OFAC compliance program" would consist of having an employee perform the checks described in the previous paragraph, informing other employees about any matches and then self-reporting violations or attempted violations to OFAC. If you have an online booking engine, you can have an IP blocking program for countries for which there is an OFAC sanctions program. You can also ask OFAC about any suspicious person or company by calling the hotline at (800) 540-6322.

For larger businesses, especially those with more than one office, you need a more formalized program. A typical program is one that explains in detail how to search the SDN list, assesses the potential challenges that you might face, appoints an executive to supervise it and provides for a training and periodic retraining program for staff.

OFAC itself has published a Framework for Compliance Commitments.

You can probably paraphrase a sample program for purposes of answering the RFP question, but then you need to be serious about implementing it.

Every business in America, no matter how small, must comply with the OFAC sanctions programs, and so must foreign affiliates of U.S. businesses. 

The penalties for violations are potentially enormous: millions of dollars in fines and long prison terms.

For example, earlier this year, SAP, the parent of Concur Travel, paid $2.1 million when its resellers in third countries licensed software to Iranian companies. Total fines from all companies in 2019 reached $1.6 billion. 


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