OFAC Maintains Broad Discretion in Sanctions Enforcement Despite Amendments

Despite making extensive amendments to its regulations, the Office of Foreign Assets Control (OFAC) will continue to maintain broad discretion when imposing penalties for sanctions violations, according to experts.

OFAC’s Enforcement Guidelines

The agency’s enforcement guidelines provide reasons for increasing or lowering a penalty, but do not restrict OFAC’s use of various mitigating and aggravating factors. This means that providing greater detail about these factors would not limit the agency’s flexibility in enforcing sanctions.

Improving Transparency and Consistency

To improve transparency and consistency in its enforcement actions, OFAC should consider three priority technical fixes:

• Define Transaction Value: The agency should provide more specific guidance on the definition of transaction value used to establish the base penalty in an enforcement action. The current definition is arbitrary and could lead to different penalties for similar violations.
• Standardize Valuation of Conduct: OFAC could adopt a universal standard to value the course of apparent violative conduct. This would help avoid wildly differing outcomes in egregious cases and take into account more important factors such as harm to the sanctions program and impact on the US financial system.
• Consistent Penalty Crediting: The agency should establish a consistent standard for crediting penalties paid to other US agencies or foreign jurisdictions. As enforcement efforts become increasingly collaborative, this would ensure that duplicate civil enforcement is avoided and penalties are applied fairly across different authorities.

Strengthening OFAC’s Sanctions Enforcement Capabilities

Experts argue that improving OFAC’s sanctions enforcement capabilities is crucial to maintaining the effectiveness of economic sanctions as a tool of first resort in foreign policy. This requires:

• Increased Budgeting: Providing sufficient resources for OFAC to effectively enforce sanctions.
• Upskilling Personnel: Ensuring that personnel have the necessary skills and training to enforce sanctions effectively.
• Harmonizing Internal Protocols: Establishing clear protocols for internal communication and coordination.
• Expanding Publicly Available Guidance: Providing clear guidance on sanctions regulations and enforcement procedures.
• Revising Regulations: Regularly reviewing and revising regulations to ensure they remain effective in achieving their intended goals.

Conclusion

Policymakers must prioritize credible, resourced, and transparent enforcement capabilities to maintain the efficacy of economic sanctions. By implementing these technical fixes, OFAC can improve its sanctions enforcement and provide a model for allies and partners to develop their own sanctions capabilities.