Financial Crime World

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Haiti Tackles Compliance Risk Assessment Frameworks to Avoid Sanctions Violations

In an effort to strengthen its sanctions compliance, Haiti has adopted a framework that aims to prevent violations and ensure the country’s economic stability. The framework, released by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), outlines five essential components for a sanctions compliance program.

Management Commitment: A Key Component

The framework emphasizes the importance of management commitment in preventing sanctions violations. Senior leadership must review and approve the sanctions compliance program, allocate adequate resources, and promote a culture of compliance within the organization. This includes addressing root causes of past violations and implementing systemic solutions.

  • Review and approval of the sanctions compliance program by senior leadership
  • Allocation of adequate resources to support the compliance program
  • Promotion of a culture of compliance within the organization

Risk Assessment: Identifying Potential Risks

A risk assessment is a critical component of the framework, as it helps identify potential risks that may lead to sanctions violations. Organizations must conduct a holistic review of their operations, including clients, customers, products, services, supply chain, intermediaries, counterparties, transactions, and geographic locations.

  • Conduct a comprehensive review of organizational operations
  • Identify potential risks and assess the likelihood and impact of sanctions violations

Internal Controls: Preventing Misconduct

Internal controls are designed to prevent misconduct and minimize risks identified by risk assessments. Organizations must establish policies and procedures that outline their sanctions compliance program, capture day-to-day operations, and define reporting and escalation chains.

  • Establish clear policies and procedures for sanctions compliance
  • Implement effective internal controls to prevent misconduct
  • Use audits to reinforce policies and procedures

Testing and Auditing: Ensuring Program Effectiveness

Testing and auditing are essential components of the framework, as they ensure organizations are aware of where and how their programs are performing. Organizations must commit to ensuring that testing or audit functions are accountable to senior management, independent of audited activities, and have sufficient authority, skills, expertise, and resources.

  • Conduct regular testing and audits of sanctions compliance programs
  • Ensure accountability to senior management
  • Provide sufficient authority, skills, expertise, and resources for testing and auditing

Training: Educating Employees

The framework emphasizes the importance of training in preventing sanctions violations. Organizations must provide job-specific knowledge, communicate sanctions compliance responsibilities, and hold employees accountable for training.

  • Provide annual training to all applicable employees
  • Tailor training programs to specific employee needs
  • Hold employees accountable for completing training

Common Compliance Program Breakdowns

OFAC notes that some common compliance program breakdowns can be tied to root causes such as:

  • Lack of a formal OFAC SCP
  • Misinterpretation or failure to understand the applicability of OFAC regulations
  • Facilitating transactions by non-U.S. persons
  • Limitations in sanctions screening software or filters
  • Improper due diligence of customers or clients
  • Decentralized compliance functions and inconsistent application of SCPs
  • Senior level employee misconduct

KPMG Perspectives

Sanctions compliance is a fundamental element of an overall well-functioning ethics and compliance program. The establishment of a framework by OFAC reiterates its importance and sets forth minimum expectations in the five core areas of management commitment, risk assessment, internal controls, testing and auditing, and training.

  • Sanctions compliance is a critical component of an effective ethics and compliance program
  • A strong sanctions compliance program may be a mitigating factor in assessing penalties
  • Organizations should look to enhance sanctions compliance both within their organization but as well to their supply and distributor providers.