Financial Crime World

US Businesses Must Be Vigilant of Financial Sanctions Obligations

Washington D.C., June 2018 - As the global economy becomes increasingly interconnected, US businesses must be aware of their obligations under financial sanctions regulations to avoid severe penalties.

The Importance of Compliance

The Office of Foreign Assets Control (OFAC), a bureau of the US Department of the Treasury, administers economic sanctions programs against countries and groups of individuals. Breaching these sanctions can result in civil monetary penalties, which can be extremely substantial.

  • Unlike the UK’s Office of Financial Sanctions Implementation (OFSI), OFAC does not require proof that an individual or entity knew they were breaching US sanctions to impose penalties.
  • It is a strict liability standard, meaning that ignorance of the sanctions is not a defense against penalty.

Applicability of Sanctions

Foreign entities operating in the US must ensure they do not inadvertently fall foul of US sanctions. These sanctions apply not only to:

  • US-incorporated companies and their foreign branches
  • Any entity operating within the US, regardless of its incorporation status

Recent Enforcement Actions

Last year, OFAC imposed over $119 million in monetary penalties on 16 parties that entered into settlements with it. In recent years, several non-US entities have been sanctioned by OFAC for violating sanctions regulations.

  • Barclays Bank plc was fined over $2.4 million in a settlement related to apparent violations of the Zimbabwe Sanctions Regulations.
  • Irish companies operating in the US or through financial institutions here should be aware that they are required to comply with US sanctions and face potential penalties if they breach them.

EU and UN Financial Sanctions Lists

It is essential for businesses to constantly monitor:

  • The EU Financial Sanctions List
  • The UN Financial Sanctions List

to ensure they are not conducting transactions with prohibited parties. Failure to comply with sanctions regulations can result in criminal prosecution, making it crucial for companies to prioritize compliance.

Quotes

“Irish firms must constantly monitor the EU and UN Financial Sanctions Lists to ensure they are not conducting transactions with prohibited parties,” said Muireann Reedy, Senior Associate at Dillon Eustace’ Regulatory Investigations Unit.

Conclusion

As US businesses increasingly operate globally, understanding financial sanctions obligations is essential to avoiding significant penalties and reputational damage. It is crucial for companies to prioritize compliance and be aware of their obligations under financial sanctions regulations.