US Companies Violate Sanctions Regulations with Alarming Frequency

Washington D.C. - A recent investigation by the Office of Foreign Assets Control (OFAC) has revealed that numerous United States-based companies have engaged in transactions or activities that violate OFAC’s regulations, leading to severe consequences.

Sanctions Evasion on the Rise

The report highlights several instances where non-US persons purchased US-origin goods with the intention of re-exporting them to sanctioned countries. Despite warning signs and contractual language prohibiting such dealings, these companies proceeded with the transactions. OFAC has taken enforcement actions against large and sophisticated organizations that engaged in this activity over an extended period.

Financial Institutions Complicit

Many non-US persons have processed financial transactions through US financial institutions, involving commercial activities with sanctioned countries or regions. This often results in prohibited activities, such as:

• The exportation of services from the United States to a comprehensively sanctioned country
• Dealing in blocked property

OFAC has focused its investigations on individuals and organizations that engaged in willful or reckless conduct, attempted to conceal their activity, or ignored warning signs.

Screening Software Failures

The report also highlights cases where organizations failed to update their sanctions screening software, neglected to include pertinent identifiers, or did not account for alternative spellings of prohibited countries or parties. This led to missed detections and potential violations.

Due Diligence Lapses

A fundamental component of an effective OFAC risk assessment is conducting due diligence on:

• Customers
• Supply chain partners
• Intermediaries
• Counter-parties

However, many companies have failed to perform proper due diligence, resulting in administrative actions taken by OFAC.

Decentralized Compliance Functions

The report notes that some organizations have decentralized compliance functions, leading to inconsistent application of sanctions regulations across different regions or departments. This lack of centralized oversight has contributed to violations and non-compliance.

Conclusion

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These findings highlight the importance of ensuring that all US-based companies understand and comply with OFAC’s regulations. Failure to do so can result in severe consequences, including:

• Fines
• Penalties
• Reputational damage

Companies with integrated operations, particularly those involving U.S.-based headquarters, locations, or personnel, are advised to ensure that all activities comply with OFAC’s regulations.