Based on its aggressive enforcement program and its recently issued Framework for Sanctions Compliance Programs, OFAC has established a new era in sanctions compliance. Trade compliance is often siloed into its own operation, sometimes in, and other times outside of, the compliance function.
Over the next five years, we will witness a sea-change in sanctions compliance programs (or at least we better witness such a sea-change). Compliance programs have to break down the silos, seek cross-function efficiencies, and unify compliance functions.
OFAC’s Compliance Framework is direct and clear about expectations and benefits that can be earned. There is no question that companies will receive significant benefits if they suffer apparent violations after implementing an effective sanctions compliance program. In some minor cases, a compliance program may make the difference between a warning letter and a civil penalty.
Companies have to keep their respective eyes on the ball and plan for implementation of a sanctions compliance program. To do so, companies have to keep their focus on five important issues:
Risk Assessment: OFAC has outlined a robust “holistic” risk assessment process that reviews a company’s geographic locations, as well as its clients and customers, products and services, supply chain, intermediaries and counter-parties, transactions, and potential mergers and acquisitions, particularly non-US companies. Two aspects of this assessment will require significant work – customers and clients and the company’s supply chain.
Senior Commitment: OFAC did not just mouth the talismanic words – “tone-at-the-top.” Instead, OFAC defined leadership commitment as requiring approval of a specific sanctions compliance program, including policies and procedures, appointment of a dedicated CCO for sanctions compliance, creation of a culture of compliance, communications to reinforce the importance of sanctions compliance, and establishment of a direct reporting line between compliance and senior management and a board committee.
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Previously published July 18, 2019 | MICHAEL VOLKOV