US Companies Found Guilty of Violating Sanctions Regulations

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

Violations of OFAC’s Regulations

According to sources, many US organizations have referred business opportunities to, approved, or signed off on transactions conducted by non-US locations and sanctioned countries or persons. In some cases, this has occurred due to a misunderstanding or misinterpretation of OFAC’s regulations.

Companies with integrated operations involving participation from their US-based headquarters, locations, or personnel are particularly vulnerable to these violations. It is crucial for such organizations to ensure that any activities they engage in comply with OFAC’s regulations.

Key Findings

The investigation revealed several key findings, including:

• Exporting Goods and Services to Sanctioned Countries: Non-US persons have repeatedly purchased US-origin goods with the intention of re-exporting them to sanctioned countries or regions, despite warnings signs indicating that this activity is prohibited by US economic sanctions laws.
• Using the US Financial System for Sanctioned Transactions: Many non-US persons have processed financial transactions through US financial institutions, involving commercial activities with sanctioned countries or regions. Although no US organization may be directly involved in the underlying transaction, the inclusion of a US financial institution in the payment process can result in a prohibited activity.
• Sanctions Screening Software Faults: Many organizations have failed to update their sanctions screening software, incorporate updates to the SDN List or SSI List, or account for alternative spellings of prohibited countries or parties. This has resulted in missed screenings and illegal transactions.
• Improper Due Diligence on Customers: Companies have failed to conduct proper due diligence on their customers, including ownership, business dealings, and geographic locations. This lack of due diligence has led to violations of OFAC’s regulations.
• Decentralized Compliance Functions and Inconsistent Approaches: The investigation highlighted decentralized compliance functions and inconsistent approaches within organizations, which can lead to a higher risk of non-compliance with OFAC regulations.

Enforcement Action

OFAC has taken enforcement action against large and sophisticated companies that engaged in a pattern of illegal activity over several years, ignored warning signs, and concealed their actions. Individuals and organizations that have engaged in willful or reckless conduct, attempted to conceal their actions, ignored warning signs, and caused significant harm to US sanctions program objectives have also been targeted.

Conclusion

These findings serve as a reminder for US-based companies to review their compliance programs and ensure that they are in line with OFAC’s regulations. Failure to comply with sanctions regulations can result in severe penalties and reputational damage.