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Top 5 Ways OFAC Will Catch an Apparent Sanctions Violation

June 11, 2012 A lot of people are knowingly involved in violations of U.S. economic sanctions administered by the United States Department of the Treasury's Office of Foreign Assets Control (OFAC) and believe they will never get caught. It is true that many violations of OFAC administered sanctions go unnoticed, however, OFAC does catch a number of them. Below is the top five (5) ways a sanctions violation comes to OFAC's attention: 1. Voluntary Self-Disclosures: This one is obvious. In an OFAC voluntary self-disclosure, a U.S. person will inform OFAC of their involvement in an apparent sanctions violation. The reason they would do this is to obtain the major reductions in enforcement response and penalties that OFAC offers for such self-disclosures. OFAC uses this information not only to follow up on the activities highlighted in the letter, but also for leads as to other sanctions violations. 2. Blocking and Reject Reports: These types of reports are submitted to OFAC whenever a U.S. depository institution blocks or rejects a transaction for suspected violation of OFAC administered sanctions. OFAC naturally follows up on these reports by issuing administrative subpoenas to the parties involved in the transaction. 3. Current Investigations: OFAC issues over 1,000 administrative subpoenas a year to obtain information on transactions suspected of violating the sanctions programs they administer. The responses to those subpoenas often yield a wealth of information concerning sanction violations and those engaged in them. As such, those currently being investigated could and do yield information which leads to investigations against others. 4. On-site audits: OFAC will also conduct onsite audits of records at financial institutions. These types of audits are often referred to in memorandums of understanding entered into between OFAC and the various state banking regulatory authorities. These types of audits reveal information which may evidence sanctions violations that the financial institution may have failed to catch. 5. Referrals from other agencies: Other federal law enforcement agencies, often come across potential sanctions violations which may not reach the level of criminal liability or the agency may not be sure how to handle the violation. In these cases, they refer the violation to OFAC to follow up on and enforce where necessary. The author of this article is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.