OFAC – New Developments and Enforcement Action Trends
In September 2024, OFAC issued an interim final rule to extend recordkeeping requirements for certain transactions from five to 10 years, as part of the Paperwork Reduction Act of 1995 and to more closely align them with expanded statute of limitation violations under the International Emergency Economic Powers and the Trading with the Enemy Act. Financial institutions will want to update their internal retention and documentation imaging system policies to ensure compliance with the rule which takes effect on March 12, 2025. This impacts records to validate OFAC compliance as well as reports filed with OFAC.
Just a reminder (in case you needed one) that OFAC fines are nothing to sneeze at (bless you!) Trends of OFAC enforcement actions over the last few years show the number and dollar amounts are relatively stable with the exception of 2023 when large companies and financial institutions, such as Binance, Wells Fargo Bank, 3M, and Microsoft received hefty penalties for their roles in violating OFAC sanctions.
- 2024 – 12 enforcement actions totaling $48,790,404
- 2023 – 17 enforcement actions totaling $1,541,380,594
- 2022 – 16 enforcement actions totaling $42,664,007
In each of these actions, OFAC determined the fined party was knowingly violating sanctions, or should have known they were violating sanctions, while portraying compliance and misrepresenting their controls for multiple years. Although the penalties in each case were hefty, when self-disclosed, the penalty amounts are significantly reduced.
Lastly, when foreign companies are the recipient of OFAC penalties, remember that means the U.S. financial system was utilized to facilitate the transactions. As a result, all financial institutions need to remain vigilant regarding OFAC compliance. With the soon to come changes in recordkeeping requirements, it might be a good idea to revisit your OFAC processes (systems, monitoring protocol, written policies and procedures, training, etc.) And it never hurts to show your board what other companies have received in OFAC penalties – a scared straight moment might just be what is needed to get their attention.
Federal Register :: Reporting, Procedures and Penalties
Civil Penalties and Enforcement Information | Office of Foreign Assets Control