Fighting against financial crime, such as money laundering and terror financing, is not solely the task of a single body. It is an accumulative effort, but among all regulatory bodies working against financial crime, OFAC Office of Foreign Asset Control) sanction lists stand tall against the wrong crimes.
The ultimate purpose of the OFAC sanction list is to check what sort of transactions are being held in the financial institution, whether they are legal or helping some dirty hands that often lead to money laundering and terror financing if someone is found to not comply with the rules and regulations defined by the OFAC compliance, the company has to face a fine or some other stringent legal actions.
The strictness of these sanctions lists could be understood by the fines imposed by the body worldwide. In 2019, OFA imposed 2.2 billion dollar fines on two central banks,UniCredit and Standard Chartered Banks.
After that, particular fines and a list of new sanctions by the OFAC forced financial institutions, including banks, to check on the existing compliance program and comply with the latest rules and regulations to make the monitoring and screening process more accurate and accessible from false positives and false negatives.
In this blog, we will discuss OFAC sanction compliance, the different OFAC sanctions lists, and the way forward for businesses to comply with OFAC.
Understanding the OFAC list and its Objectives
The United States Treasury Department is responsible for controlling the OFAC sanction lists, updating them, adding new entities, and removing some previous entities. The sanctions are often imposed on the targeted countries, individuals, terrorist entities, and groups that, in one way or another, create some sort of threat to national security, and damage the foreign affairs policy.
The objective of the OFAC sanction list
The following three objectives are OFAC sanctions imposed on countries, individuals, and terrorist groups.
- Protecting National Security; The OFAC sanction list should prohibit anyone from doing business threatening national security.
- Supporting Foreign Policy; The Treasury Department ensures that any individual or country doesn’t hurt foreign policy. If they find suspicious actors involved in damaging their foreign policy, they immediately put them on the sanction list.
- Maintaining Economic Integrity; The US is the trendsetter for anti-money laundering activities, so it tries to ensure that its financial systems are not used for illegal activities.
What are the different types of Office of Foreign Asset Control Sanctions lis?t
The sanctions imposed by the OFAC have several vital lists, and every sanction listserv see different purpose.
- Specially Designated Nationals List (SDN)
OFAC ensures that its financial systems are not being used by any individual or group of individuals who are somehow involved in any activities related to terrorism, drug trafficking, human trafficking, and other crimes that pose threats to national security.
- Sectoral Sanctions Identifications (SSI) List
This sanction list particularly focuses on the sanctions on the Russian economy. The sanctions include those on the energy sector and financial services. OFAC restricts the US national and business community from making energy or financial transactions.
3. Foreign Sanctions Evaders (FSE) List
The The sanctions imposed on Iran due to their violation of the proliferation of mass destruction weapons haves much importance in the eyes of the US. Foreigners who violate such sanctions are put on the foreign sanctions evaders list.
4. Non-SDN Palestinian Legislative Council (NS-PLC) List
Hamas is designated as the Terrorist group or party. So, some Palestinian individuals appear in the general election on behalf of HAMAS and another terrorist group. OFAC imposes such individuals in the Non-SDN Palestinian Legislative List (NS-PLC) list.
How often should Businesses check the sanction list?
There are no obligations for businesses to check the sanction list details. However, there are certain incidents when these sanction lists must be checked. For example, when you are planning to onboard a new customer and there will be some commercial transactions.Businesses also need to regularly check on their existing customers or business partners to ensure the AML compliance program.
Compliance Program and the need for Sanction screening Software.
Though there is no hard and fast rule for screening your customer and business partner against the OFAC sanctions list, the process would be pretty complicated for the business without an advanced screening tool. As we all know, traditional or manual screening takes too much time. It increases the chances of false positives and negatives, which could ultimately damage your business reputation. So, what is the solution, then? The screening tool is integrated with advanced AL and ML technology.
Given the latest challenges facing financial institutions in complying withe regulatory bodies’ programs due to regulatory updates in the compliance program,the AML watcher OFAC sanction screening list tool can enhance transparency and integrity for businesses.
