Fiducitation: OFAC Compliance Procedures
Author: Ray Ferrara
and Brian OKeeffe
Date: December 7,
2001 © 2001 Fiducite.com, Inc.
Fiducitation: A
synthesis of public Internet resources on the topic.
Instructions: Use the Table of Contents to navigate the document. Each citation has up to four distinct parts: Annotation, Clip, Source, and Cached File. Our Annotation and Clip (text or graphic from source document) help you decide whether to view the document. The source document may be viewed by clicking on the Source URL or by opening the embedded Cached File. All information is attributed to its source.
The purpose of this
Fiducitation is to determine compliance procedures for identifying Specially
Designated Nationals (SDNs) according to the Office of Foreign Assets
Control. The Office of Foreign Assets Control
("OFAC") of the U.S. Department of the Treasury administers and
enforces economic and trade sanctions against targeted foreign countries,
terrorism sponsoring organizations and international narcotics traffickers
based on U.S. foreign policy and national security goals. OFAC acts under
Presidential wartime and national emergency powers, as well as authority
granted by specific legislation, to impose controls on transactions and freeze
foreign assets under U.S. jurisdiction. Many of the sanctions are based
on United Nations and other international mandates, are multilateral in scope,
and involve close cooperation with allied governments. It is also important to
note that while this document focuses primarily on OFAC compliance, the same
solutions and software discussed in subsequent sections can be also applied to
other similar government proscription lists, including the FBIs Control List
and the Commerce Bureaus List of Denied Parties.
The essence of the OFAC compliance is that
those persons or corporations subject to US Jurisdiction are compelled to (a)
report any attempted activity or transactions by or with individuals or
organizations on the blocked party list, (b) freeze or otherwise constrain
the assets of blocked parties, and (c) refrain from other proscribed
activities, such as travel to designated areas. Penalties for non-compliance
range from fines up to $5M and to 30 years imprisonment, depending on the type
of sanction violated and type of industry (e.g. finance, insurance, tourism,
import/export, etc.)
For financial institutions,
both the penalties and expected compliance procedures are clearly spelled out
in the attached OFAC publication entitled Foreign Assets Control Regulations
for the Financial Community. The three
key areas which most financial institutions should focus on are:
1) ensuring there is a named individual or department
acting to oversee compliance activities
2) checking individual customers and counterparties as
they perform certain transactions, such as opening a new account, sending a
wire, or obtaining a letter of credit; and
3) checking the entire customer database whenever OFAC
changes the SDN list, to ensure that no current customers are OFAC matches.
For reference, an actual current copy of the list of
blocked parties or SDNs is included below. It currently includes about 3,000
individuals known for affiliation with governments or groups against which the
US Government wishes to impose sanctions or restrictions, such as Cuba or Al
Qaida [sic-Government spelling].
Updates occur at unpredictable intervals, since addition or deletion
from the list depends upon equally unpredictable political events. Although the
list is relatively small, manual checking
of transactions and customer lists against it is out of the question for most
institutions, so they are turning to automated solutions. To effectively cover
both transactional and master file activities, the automated solution must be
able to effectively search the current OFAC list, both on an individual
transactional basis, as well as in a batch mode.
A fairly well developed software industry has
developed around OFAC compliance. Companies involved range from larger
multi-product providers such as Prime Associates or Logicas Hotscan or Thomson Financial with its FAC product
line down to single focus firm like Fundtech or Bridger Systems. Several of the
more prominent vendors are included in the vendor section of this document.
OFAC
Software Vendor Information
Author:
OFAC
publication - Foreign Assets Control Regulations for the Financial Community
Annotation:
This
OFAC document provides compliance guidelines for financial institutions under
US Jurisdiction.
Clip: The Table of
Contents includes the following sections:
I.
Introduction ............. ......................................................................
..............
2
II. OFAC Laws,
Embargoed Countries, and Criminal Penalties
....................................................................... 2
III. Civil
Penalties ........ ......................................................................
...............
2
IV. Compliance
Programs and Audit Procedures
..............................................................................................
3
V.
Terminology........
............... 4
A--Blocking ............... . ...................................................................... ...... 4
B--Blocked Ac count .....
......................................................................
.
...
4
C--General Li cense ..
......................................................................
.........
4
D--Specific Li cense
......................................................................
...........
4
E--Offset .......... ......................................................................
..................
4
F--Property....
......................................................................
.....................
4
G--Person Subject to the Jurisdiction of the United
States............................................................... 4
H--Specially Designated
Nationals...................................................................................................
4
I--Census ............. ......................................................................
..............
4
VI. Bank
Responsibility by
Country..................................................
.......
.............................................
5
A--CUBA.................... .................................................
.............................
..
5
B--NORTH KO REA......
............................................
...........
............
.
9
C--LIBYA
.
.....................................................
...........
....
..................
9
D--IRAQ ............
............................................................
.
...
.....
..............11
E--YUGOSLAVIA .....
......................................................
.............
.
.
.....13
F--UNITA (Angola)...
......................................................................
.
.........14
G--IRAN .....................
......................................................................
....15
H--TERRORI SM (SDTs, SYRIA, FTOs)
.....................................................................................18
I--NAR COTICS (SDNTs)
.............................................................................................................21
J- -BURMA (MYANMAR)
...
.22
K--SUDAN
.................
....23
L-- NONPROLIFERATION...............................................................................................24
M- TALI BAN (Afghanistan
...
25
N- SI ERRA LEONE (rough diamonds)
........................................................................................27
O- LI BERIA (rough diamonds)
....................................................................................................28
P- THE BAL KANS
.
.........29
VII. Reporting
and Procedures (including forms TD F
90- 22.50).............................................
................31
Source: http://www.ustreas.gov/ofac/t11facbk.pdf
Cached
File:
OFAC Publication - FOREIGN ASSETS CONTROL REGULATIONS
AND THE INSURANCE INDUSTRY
Annotation:
This
is a recent addendum to the above publication and includes special new
regulations for banking and insurance regarding terrorist groups.
Clip: The President has issued a new Executive Order
targeting
terrorists
and a number of new names have been added to OFAC's
SDN List
under the Order. Their assets need to be blocked and
immediate
notice give to OFAC.
Source: http://www.ustreas.gov/ofac/t11facin.pdf
Cached
File:
OFAC Current List of Specially Designated Nationals and Blocked Persons
Annotation:
This PDF document, published December 4, 2001 gives the latest list of
organizations and persons, with addresses and aliases, that are specially
designated by OFAC. The .EXE associated with this document provides this list in a fixed-length
machine-readable text file format.
Clip: This publication of Treasury's
Office of Foreign Assets Control ("OFAC") is designed as a reference
tool providing actual notice of actions by OFAC with respect to Specially
Designated Nationals and other entities whose property is blocked, to assist
the public in complying with the various sanctions programs administered by OFAC.
The latest changes may appear here prior to their publication in the Federal
Register, and it is intended that users rely on changes indicated in this
document that post-date the most recent Federal
Register publication with respect to a particular sanctions program in
the appendices to chapter V of Title 31, Code of Federal Regulations. Such changes reflect official actions of
OFAC, and will be reflected as soon as practicable in the Federal Register
under the index heading "Foreign Assets Control." New Federal Register notices with regard to
Specially Designated Nationals or blocked entities may be published at any
time. Users are advised to check the
Federal Register and this electronic publication routinely for additional names
or other changes to the listings. Entities and individuals on the list are
occasionally licensed by OFAC to transact business with U.S. persons in
anticipation of removal from the list or because of foreign policy
considerations
in unique circumstances.
Licensing in anticipation of official Federal Register publication of a
notice of removal based on the unblocking of an entity's or individual's
property is reflected in this publication by removal from the list. Current information on licenses issued with
regard to Specially Designated Nationals and
other blocked persons may be obtained or verified by calling OFAC
Licensing at 202/622-2480. last paragraph of document.
Source: http://www.ustreas.gov/ofac/t11sdn.pdf
Cached
File:
Cached
File (for fixed-length machine readable files):
Microbanker OFAC Software Directory
Annotation:
A
software directory from the publishers of Microbanker.
Clip: Look here for programs that implement compliance with OFAC
regulations to prevent transferring funds (wire transfers) to specially
designated foreign nationals. Programs cover the operational needs of community
banks through the largest banking institutions.
Source:
http://www.microbanker.com/cfm/results.asp?SPC=1&BARE=0&sAREA=Software&sTYPE=Keyword&sKEYWORD=556&sTITLE=&sVENDOR=&sALTHEADER=%5Cmbheader%2Ehtml&sALTFOOTER=%5Cmbfooter%2Ehtml
Cached
File:
OFAC Frequently Asked Questions (from Bridger Systems)
Annotation:
This
Frequently Asked Question list (FAQ) covers the basic software options and
features to consider when implementing a solution. It is biased towards
Bridgers own OFAC software, however.
Clip: What are the options for
searching the OFAC list?
There are three primary alternatives: 1)
Manually search the printed list. 2) Develop a simple text search routine. 3)
Purchase specialized OFAC software. We will discuss some aspects of these
alternatives.
1. Manually search the printed list - Since there are nearly 3000 names on the OFAC SDN list, manual
searching is very difficult and time consuming. We have found that most
companies that plan to do this, end up searching the list very rarely in
practice. In addition, many names that require blocking, such as Fidel Castro,
do not appear in OFAC's list. These OFAC names would thus be missed, even if
the list was thoroughly checked. The difficulty of manual searching and
incompleteness of this solution expose the company to the risk of an OFAC
violation.
2. Develop a simple text search routine - OFAC provides downloadable text files that can be searched. However,
an exact string search for matches will generally miss true matches, because
the search will miss name variations, name order differences, abbreviation and
initialization differences, foreign transliteration variations, and potential
typos. Secondly, as stated above, OFAC's published list is incomplete. In
addition, a simple straight-text search on single words will produce a large
number of needless false positive matches, greatly adding to the compliance
burden. While less burdensome than manual searching, simple text searching of
OFAC's list carries the risks of easily missing true matches, as well as having
excess false positive matches.
3. Purchase specialized OFAC software - The most reasonable alternative is to purchase software that has been
specifically designed for OFAC matching and is enhanced with additional OFAC
names. The OFAC software should be able to intelligently catch name variations,
name order differences, abbreviations, initializations, foreign transliteration
variations, typos, and more, while minimizing false positive matches. This will
allow your OFAC monitoring process to be effective and efficient. Such a
solution will minimize the time required to be spent on OFAC compliance, as
well as greatly reducing the employee burden. Very few products are available
with this combination of power and efficiency, and they are well worth the
investment in most cases. extracted
text.
Source:
http://ofaccompliance.com/OFAQ.htm
Cached
File:
Prime Associates, Inc. OFAC Software
Annotation:
Site
for one of major vendors for OFAC software.
Clip: Prime Associates The one-stop resource for all your OFAC Compliance needs. The OFAC Compliance Center outlines the current government regulations, includes an interactive map of sanctioned countries, contains links to relevant government sources, and explains Prime Associates' unique OFAC Solution, the OFAC Reporter Product Suite.
Source: http://www.primeassociates.com/index.html
Cached
File:
Thomson Financial OFAC site
Annotation:
Covers all of Thomsons extensive FAC
product line.
Clip:
Source: http://www.tfp.com/risk_ofac.shtml
Cached
File:
Bankers Training & Consulting
Annotation:
Offers
training and consulting on OFAC.
Clip: Learn more about programs that cover today's issues: OFAC Money
Laundering Identity
Theft Today!.
Source: http://www.btcc.com/
Cached
File: