Risk & Compliance Glossary
- Risk & Compliance Glossary
- What are Economic Sanctions?
- Penalties for OFAC Sanctions List Violations
As the world’s largest economy, the United States’ stance against financial crime, including money laundering and terrorist financing, sets the tone for actions in other countries. For many U.S. policymakers, economic sanctions have become a standard tool in deterring criminal activity.
What is OFAC?
The U.S. Treasury Departments’ Office of Foreign Assets Control (OFAC) administers and enforces these sanctions across various target groups. Companies that deal with foreign entities must learn the enforcement guidelines of the sanctions lists to avoid harsh civil penalties. There’s a duty to know the end-to-end provenance of all goods and services in a transaction and avoid any deals that have sanctions implications, and recent enforcement actions highlight the duty to know the entire transaction chain for both individuals and financial institutions.
What is an OFAC sanctions lists?
The two main types of sanctions lists maintained by OFAC are the Specially Designated Nationals (SDN) list, a list of individuals and companies in countries targeted by U.S. sanctions, and the Consolidated Sanction Lists (CSL), which contain details about restricted parties not covered by the SDN list.
Some lists found in the CSL include the Sectoral Sanctions Identification List (SSI), the Non-SDN Iranian Sanctions Act (NS-ISA), and the Foreign Sanctions Evaders List (FSE), amongst more.
Financial institutions and banks will often canvass the OFAC Sanctions lists in their anti-money laundering and sanctions compliance programs. Typically, U.S. persons or entities are prohibited from engaging in trade or financial transactions with sanctioned parties; however, OFAC will grant exemptions under certain circ*mstances.
What are the penalties for violating OFAC sanctions?
OFAC treats sanctions list violations as a serious threat to national security and foreign relations. As a result, criminal offenders face monetary fines ranging from a few thousand dollars to several millions and/or prison time up to 30 years.
As of 2020, parties that break the Trading with the Enemy Act face fines of about $90,000 per violation. Violating the International Emergency Economic Powers Acts come with penalties of about $308,000 per violation. Similarly, breaking the Foreign Narcotics Kingpin Designation Act costs about $1.5 million per violation. The severity of punishments depends on the crime and the number of prior convictions.
Financial institutions that have paid massive civil penalties—many over $1 billion—include UniCreditBank, ZTE Corporation, Standard Chartered, Crédit Agricole, Société Générale and BNP Paribas.
