Financial Crime World

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Compliance with Sanctions Regimes: A Guide for Financial Institutions

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This document outlines the guidelines for compliance with various sanctions regimes, including those set by OFAC (Office of Foreign Assets Control). The purpose of these guidelines is to ensure that financial institutions are aware of their obligations and take necessary steps to comply.

Transaction Control Processes

Employee Responsibilities

  • Financial institutions must ensure that employees are not providing consultations or assisting clients in preparing documents for actions aimed at circumventing compliance requirements or tax obligations.
  • Employees should be properly trained on transaction control processes.

Importance of Proper Training

Proper training is essential to ensure that employees understand the importance of complying with sanctions regimes. This includes understanding the potential consequences of non-compliance and the measures that can be taken to prevent violations.

Reporting About Violations and Sanctions

Consequences of Non-Compliance

  • If a financial institution fails to comply with the guidelines, the Association’s Council will take action according to procedures outlined in the Articles of Association.
  • Financial institutions must ensure that their internal control systems are sufficient and adequate for compliance with sanctions regimes.

Importance of Reporting Violations

Reporting violations is crucial to ensuring that financial institutions take responsibility for their actions. This includes reporting any instances of non-compliance to the relevant authorities and taking corrective action to prevent future violations.

OFAC Sanctions Compliance

International Obligations

  • Latvia is obligated to comply with international sanctions set by the United Nations and EU, and financial institutions play a significant role in fulfilling this obligation.
  • Financial institutions must improve their compliance with international, national, and extraterritorial sanctions regimes through cooperation with state authorities and other financial institutions.

Categories of Sanctions

OFAC sanctions programs cover several categories of sanctions against countries, entities, individuals, and organizations involved in international crime. These include:

  • Country-specific sanctions
  • Entity-specific sanctions
  • Individual-specific sanctions
  • Organization-specific sanctions

Compliance Measures

Preventing Transactions

Financial institutions must comply with OFAC sanctions prohibitions and prevent transactions that contravene those prohibitions.

“Comply or Explain” Principle

They must follow the “comply or explain” principle, ensuring full implementation of OFAC sanctions or documenting specific circumstances and reasons for non-compliance.

Eliminating Obstacles

Financial institutions must invest in eliminating obstacles hindering compliance with OFAC sanctions.

Training and Awareness

Regular Trainings

The Association will conduct regular trainings on implementing OFAC sanctions for financial institutions’ employees.

Public Awareness Events

They will also hold events to inform the public about their duties under the guidelines.