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OFAC Sanctions Compliance Programs

United States2021AML/CFTTax & Reporting

Overview

The Office of Foreign Assets Control (OFAC) within the U.S. Treasury administers and enforces economic and trade sanctions against targeted countries, regimes, individuals, and entities. In 2019, OFAC issued its Framework for Sanctions Compliance Programs (SCPs), which outlines the essential components organizations should implement to ensure compliance. The framework stresses the importance of a risk-based approach, tailored to a company’s operations, size, industry, and geographic exposure, to prevent inadvertent or willful violations of sanctions.

The SCP guidance is not industry-specific but applies broadly across the global economy. It is particularly critical for banks, securities firms, insurers, payment providers, fintechs, multinational corporations, exporters and importers, logistics and shipping firms, and energy sector operators. By maintaining robust compliance programs, organizations can reduce regulatory risk, strengthen due diligence, and demonstrate good faith in case of enforcement actions.

Key Obligations

Conduct sanctions risk assessments to identify exposure based on products, services, geography, and counterparties
Implement internal controls such as policies, procedures, and screening tools to detect prohibited transactions
Carry out regular testing and auditing of sanctions compliance measures

Ensure management commitment and allocation of sufficient resources to compliance functions
Provide ongoing training for employees on sanctions obligations and red-flag scenarios
Maintain records of transactions, counterparties, and screening results for regulatory review

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Related Regulations

Bank Secrecy Act (BSA) — US AML Law

FinCEN CDD Beneficial Ownership Rule

USA PATRIOT Act — AML Provisions

FAQ

Who must comply with OFAC sanctions?

All U.S. persons and companies, including citizens, residents, U.S.-incorporated entities, and foreign branches.

Do non-U.S. companies need to comply?

Yes, if they conduct transactions involving U.S. persons, the U.S. financial system, or goods of U.S. origin.

What happens if a company violates sanctions?

OFAC may impose civil monetary penalties, enforcement actions, license restrictions, and reputational consequences.

Is a compliance program mandatory?

While not explicitly required by statute, OFAC strongly expects companies to have one. A robust program can be a mitigating factor in enforcement decisions.