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Best Practices for OFAC Compliance in 2021

Understanding OFAC: A Best Practices Compliance Guide for All Businesses.

For compliance professionals who export, OFAC compliance is non-negotiable: If you’re shipping to an entity that is identified by OFAC, you must be aware of the necessary sanctions for each shipment.

The Office of Foreign Assets Control (OFAC) administers sanctions based on US foreign policy. It enforces both economic and trade sanctions with the primary objective of following the national security standards of the US. OFAC focuses on four major activities, including terrorism, narcotics, targeted foreign countries, and weapons of mass destruction. Exporters need to be fully compliant with the regulations prescribed, as any case of non-compliance can be penalized by monetary fines, bans, or even prosecution. This blog discusses a few best practices that could help you achieve full OFAC compliance.

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Best Practices To Help Your Business

Complying with OFAC regulations is not a straightforward task as there is no single list that you can check. However, to ensure that you adhere to some basic compliance elements, here are four key points to follow. 

Check the Specially Designated Nationals List: This list includes information related to individuals and companies who typically act on behalf of targeted nations. All assets of such persons or companies are blocked, and US-based exporters are prohibited from any transactions. Therefore, it is good practice to monitor this list continually and cross-check all your export shipments against it as it is periodically updated.  

Use Specialized Software: If there is any doubt regarding OFAC compliance, employing specialized software can help; it is recommended to choose a solution that is holistic in nature and covers different types of compliance requirements.

  • Focus on the 50% Rule: It is also necessary to check on all the rules and regulations, especially the 50% rule. As per this rule, companies must check whether the customer company they are doing business with is owned by an entity that is listed by OFAC. It is advisable to check on the ownership details of all individuals and entities being dealt with, as there is always the possibility that your customer may be 50% owned by a prohibited person or entity.
  • Keep a Check on Ownership: Even if a prohibited person or entity does not own 50% of your customer, it is important to continue to check their interest in the firm. Even if the stake is not currently at 50%, there is a possibility that it may increase in the future. Continuous monitoring of ownership structure could save you from a situation where you violate the 50%  

Thus, if you follow the above best practices, you will remain protected from all types of fines and penalties. Also, it will help in eliminating reputation risks and reducing any risks of disruption.

Conclusion

Following the above recommendations could help achieve OFAC compliance. If you are looking for external assistance related to your trade compliance program, our global trade management software can assist your business in complying with all trade regulations. For more information about our offerings, please contact us.