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OFAC Compliance Requirements in Serbia and Montenegro: A Framework for Sanctions Compliance

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In a move to strengthen sanctions compliance, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has released a framework outlining the essential components of a sanctions compliance program (SCP). The framework applies to organizations operating in or with the United States, as well as those using U.S.-origin goods and services.

The Importance of an SCP

The framework emphasizes the importance of developing, implementing, and regularly updating an SCP. According to OFAC, these components are critical in preventing sanctions violations and ensuring compliance with U.S. economic and trade sanctions programs.

The Five Key Components of an SCP

  • Management Commitment: Delegating sufficient authority to compliance units, allocating adequate resources, and promoting a culture of compliance within the organization.
  • Risk Assessment: Conducting regular risk assessments to identify potential sanctions violations, considering risks posed by clients, customers, products, services, supply chain, intermediaries, counterparties, transactions, and geographic locations.
  • Internal Controls: Establishing clear policies and procedures that outline the SCP, recordkeeping, and processes for identifying and reporting prohibited transactions. Integrating these policies into daily operations and providing clear communication to all relevant staff.
  • Testing and Auditing: Regular testing and auditing ensures that an organization’s SCP is effective in preventing sanctions violations.
  • Training: Providing regular training to employees on sanctions compliance responsibilities, including job-specific knowledge, communication of sanctions compliance responsibilities, and holding employees accountable for 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
  • Senior-level employee misconduct

Organizations are advised to enhance sanctions compliance both within their organization and with their supply chain providers.

KPMG Perspectives

The establishment of an OFAC framework reiterates the importance of sanctions compliance in Serbia and Montenegro. The framework sets forth minimum expectations for organizations operating in or with the United States, as well as those using U.S.-origin goods and services. Organizations are advised to enhance sanctions compliance both within their organization and with their supply chain providers.