OFAC Lawyers

Navigating the regulations set by the Office of Foreign Assets Control (OFAC) is a complex legal process that demands experienced legal guidance from a team specializing in OFAC-related issues. Whether you need assistance with obtaining OFAC licenses or understanding how to address potential violations, strategic counsel is essential to ensure compliance.

What is OFAC?

OFAC (Office of Foreign Assets Control) is an agency within the U.S. Department of the Treasury responsible for administering and enforcing economic and trade sanctions based on U.S. foreign policy and national security goals.

Sanctions are imposed against foreign states, organizations, and individuals that pose a threat to the national security, foreign policy, or economy of the United States.

The main task of OFAC is to prevent the financing of terrorism, the proliferation of weapons of mass destruction, and other actions that threaten the security of the United States. OFAC sanctions ensure economic stability, protect the U.S. financial system from illegal operations, and money laundering.

OFAC Functions

Among the primary functions of OFAC, the following should be highlighted:

1. Administration of sanctions programs: development, updating, and management of various sanctions regimes, including lists of prohibited individuals and organizations.
2. Monitoring and compliance: overseeing financial and commercial transactions to identify and prevent sanctions violations.
3. Issuance of licenses: the granting of special permissions to conduct certain transactions that would otherwise be prohibited.
4. Consultations and information provision: supplying businesses and financial institutions with information and guidance for compliance with sanction requirements.

Failing to comply with sanction programs can lead to serious legal consequences, including substantial fines and criminal liability. Therefore, it’s important to regularly consult with legal experts to ensure strict compliance with OFAC requirements.

The Scope of OFAC’s Authority

At first glance, it might look like OFAC mainly deals with big national security issues such as terrorism and international drug trafficking, which could make it seem like most businesses don’t need to worry about complying with OFAC regulations. However, one of OFAC’s duties is to oversee U.S. companies that do business internationally. Therefore, it’s crucial for any business that has customers or suppliers abroad to set up an OFAC compliance program.

The following scenarios require the implementation of an OFAC compliance program:

1. A business regularly engages with an individual, organization, or country that is listed on the OFAC sanctions list.
   A business carries out a significant amount of international transactions.
   3. A business experiences changes in its customer base due to mergers or acquisitions.
   A business provides electronic products and services.
   5. The business has a history of previous violations or encounters with OFAC.

Types of OFAC Sanctions

OFAC sanctions vary in their nature and application. Let’s examine the main types of sanctions used by this organization.

Sanctions against specific countries

These sanctions are targeted at specific countries that the U.S. government considers a threat to national security or foreign policy interests. Currently, they are applied to Iran, North Korea, Syria, and several other countries. These sanctions include:

• Full or partial trade embargo: a ban on the import and export of goods and services.
• Financial restrictions: blocking transactions and freezing assets related to the government or organizations of a sanctioned country.
• Investment restrictions: a ban on American companies and citizens from investing in the economy of a sanctioned country.

Intellectual sanctions

Targeted or “smart” sanctions are aimed at specific individuals, organizations, or groups involved in undesirable actions: terrorism, human rights violations, proliferation of weapons of mass destruction, and other crimes. These sanctions include:

• Freezing assets: blocking access to financial resources;
• Travel Ban: Restrictions on Travel to the USA;
• Business relationship restrictions: American companies are prohibited from cooperating with sanctioned entities.

Sectoral sanctions

Sectoral sanctions target key sectors of a specific country’s economy: energy, defense, the financial sector, or technology. They restrict access to American capital, technology, and markets for companies operating within these sectors.

The main goal of such sanctions is to limit the economic development of strategically important sectors, as well as to stimulate changes in the foreign or domestic policy of a specific country. The primary tools of sectoral sanctions include:

• Prohibition on providing financial, technical, advisory, and other types of services;
• Export and import restrictions on specific goods and technologies.

Secondary sanctions

Secondary sanctions apply to foreign companies and individuals who are not residents of the U.S. but interact with entities under OFAC’s primary sanctions. This means that even without direct ties to the United States, foreign entities can face restrictions due to their cooperation with sanctioned individuals or organizations.

The primary goal of secondary sanctions is to increase pressure on target states or organizations by isolating them from the global economic system. These sanctions imply:

• Restrictions on access to the American market: prohibition on conducting business in the USA or with American companies.
• Financial penalties: substantial monetary fines;
• Reputational risks: loss of trust from international partners.

Compliance Programs

Failing to comply with sanction programs can lead to severe financial penalties, criminal prosecution, and loss of business reputation. Therefore, implementing an effective OFAC compliance program is a necessary step to minimize risks and ensure the legality of operations.

The first step in creating a compliance program is a comprehensive risk assessment. It’s necessary to identify the areas of operation, products, services, and geographic regions that could be subject to sanctions restrictions. Additionally, it’s important to check current and potential clients, partners, and suppliers for inclusion on OFAC sanctions lists.

Based on a risk assessment, it’s essential to develop clear internal policies and procedures. Create an official document that outlines the company’s obligations to comply with OFAC sanctions. It’s also necessary to implement systems for regular screening of counterparties and transactions.

Every system requires continuous monitoring, the use of software, and tools for compliance tracking. It’s essential to conduct periodic checks of the program’s effectiveness.

A qualified lawyer can help identify potential legal risks and develop a strategy to minimize them. They conduct audits and internal investigations, and represent the company’s interests before regulatory bodies.

OFAC’s Range of Economic Sanctions Initiatives

The Office of Foreign Assets Control (OFAC) oversees four primary types of trade and economic sanctions. Each type encompasses a wide range of specific OFAC sanctions that American financial institutions and businesses are required to follow.

Oberheiden P.C. helps these organizations and companies identify applicable sanctions, ensure compliance, and offers legal defense in OFAC enforcement actions across all four categories.

The economic and trade sanctions managed by OFAC include:

Country-Specific Economic Sanctions

The Office of Foreign Assets Control enforces economic sanctions against 18 countries, restricting or prohibiting trade. These OFAC sanctions can target entire foreign countries or specific types of transactions or market sectors. Current country-specific sanctions include:

• Afghanistan
• Belarus
• Myanmar
• Chinese Military Companies
• Cuba
• Ethiopia
• Hong Kong
• Iran
• Nicaragua
• North Korea
• Somalia
• Sudan, Darfur, and South Sudan
• Syria
• Ukraine
• Venezuela

OFAC frequently grants general licenses that permit specific economic activities in these countries. To effectively defend against accusations of violating OFAC rules, it’s usually required to demonstrate that the transaction complied with a particular general license.

2. List-Based or Smart Sanctions

These OFAC sanctions focus on specific threats rather than entire countries. They include:

1. Counterterrorism
2. Cyber-related activities
3. Genocide and Human Rights Abuse
4. Transnational Organized Crime
5. Financial sector
6. Weapons Proliferation

These sanctions specifically target individuals, businesses, and entities identified as Specially Designated Nationals or Blocked Persons (SDNs). They freeze any assets these parties may have and prevent U.S. persons from engaging in any transactions with them.

3. Sector-Based Sanctions

Sectoral sanctions focus on specific areas of trade within certain countries, rather than targeting entire nations or specific entities. A key example is the sector-specific OFAC sanctions tied to Ukraine, particularly after Russia’s annexation of Crimea and the continuing conflict.

4. Secondary Sanctions

These OFAC sanctions target organizations that engage with or do business with SDNs. Although they’re fairly recent and not widespread yet, the introduction of secondary sanctions suggests that this program might grow.

What is an OFAC sanctions attorney?

An OFAC sanctions attorney is a professional with a deep understanding of U.S. sanctions laws and international regulations. They possess expert knowledge in international law, capable of assessing and minimizing the risk of sanctions violations for companies.

Our OFAC legal team is ready to offer the following services to our clients:

1. Analysis of company operations for potential sanctions violations;
2. Implementing effective procedures to comply with OFAC requirements;
3. Conducting training sessions and seminars to increase employee awareness;
4. Representing the company’s interests during inquiries and investigations by the regulator.
5. Conducting negotiations on possible penalties and measures to address violations;
6. Developing legal strategies to avoid violating sanctions;
7. Obtaining OFAC special licenses.

Promptly consulting with OFAC lawyers can help avoid fines, maintain business reputation, and reduce risks associated with audits. Seeking advice from such a specialist is a strategic decision for companies aiming to thrive in the global market.

Protection against economic sanctions

Failing to comply with sanctions can lead to significant fines, reaching into the millions of dollars. There’s also the possibility of civil and criminal prosecution, including jail time for those responsible. Violating sanctions can negatively impact a company’s reputation, leading to the loss of partners and clients.

Strategies for Protection Against OFAC Economic Sanctions:

1. Implementing a compliance program: the foundation for protection against sanction risks, which involves developing clear internal documents to regulate employee actions, as well as technologies for monitoring transactions and vetting counterparties.
2. Conducting regular risk assessments: identifying business areas most vulnerable to sanctions risks, evaluating potential sanctions consequences before launching new business initiatives;
3. “Know Your Customer” (KYC) procedures: using specialized tools and databases to verify clients, suppliers, and partners for inclusion on sanctions lists.
4. Monitoring and updating compliance programs: timely updating of internal policies and procedures, regular review of the compliance program’s effectiveness.

Collaborating with experienced legal professionals will help minimize risks and ensure sustainable business development in the complex international legal landscape.

How Our OFAC Sanctions Lawyers Can Help

Given the numerous broad, targeted, and intersecting sanctions programs in place, Americans could unintentionally face or break laws related to OFAC sanctions. Furthermore, individuals looking to explore an investment or project that could clash with OFAC sanctions rules will need to seek advice from an experienced OFAC attorney.

Before getting involved in these kinds of activities, companies and people should consult with a lawyer who specializes in OFAC Sanctions to prevent any possible infractions. An OFAC attorney can assist you in evaluating risks and creating strong compliance strategies to dodge both civil fines and criminal charges. So, you shouldn’t wait until you receive an OFAC administrative subpoena to get legal advice.

Iryna Berenstein

Associated Partner

Mrs. Berenstein is a distinguished and outstanding lawyer with profound experience and exceptional legal knowledge in the field of International Private Law, Financial Law, Corporate Law, investment regulation, Compliance, Data Protection, and Reputation Management.

Phone:

+12029293711

Email:

[email protected]

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