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Digital Subscriptions > The Hedge Fund Journal > Issue 142 – Aug 2019 > OFAC Update

OFAC Update

A framework for compliance and recent settlements

On May 2, 2019, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) published “A Framework for OFAC Compliance Commitments” (“Framework”) outlining five critical components of a riskbased sanctions compliance program.1 Along with the Framework, OFAC also released a list of compliance program deficiencies most commonly identified as root causes of apparent violations of OFAC regulations. As discussed below, several of these deficiencies have, in fact, been identified by OFAC in its latest settlements and findings, which reflect an aggressive approach to sanctions enforcement, including multimilliondollar settlements for activity that was primarily conducted abroad by foreign affiliates of US companies.

OFAC’s “A Framework for OFAC Compliance Commitments”

OFAC regulations do not require companies to maintain a sanctions compliance program, or “SCP” for short. Nonetheless, OFAC encourages firms subject to US jurisdiction — including foreign entities that conduct business in or with the United States, US persons, or using USorigin goods or services — to adopt a formal SCP. The Framework is intended to assist such firms in developing, implementing and updating their respective SCPs. It also outlines how OFAC may evaluate apparent violations and resolve investigations resulting in settlement. More specifically, if, after determining that a civil monetary penalty is the appropriate administrative action in response to an apparent violation, OFAC will evaluate a firm’s SCP — consistent with the Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, App. A — and will consider favorably the existence of an effective SCP at the time of an apparent violation.

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