Written by Shari R. Pogach, Regulatory Paralegal, NCBSO
The general factors used in determining an administrative action for Office of Foreign Assets Control (OFAC) violations were discussed during its fall symposium held in December 2016, here in Washington, DC. There are 11 general factors that must be analyzed by OFAC. These factors and the related underlying activity include:
- Willful or reckless violation of law – willfulness; recklessness; concealment; pattern of conduct; prior notice; management involvement.
- Awareness of conduct at issue – actual knowledge; reason to know; management involvement.
- Harm to sanctions program objectives – economic or other benefit to the sanctioned individual, entity or country; implications for U.S. policy; license eligibility; humanitarian activity.
- Individual characteristics – commercial sophistication; size of operations; financial condition; volume of transactions; sanctions history.
- Compliance program – risk-based compliance; consultation with regulator.
- Remedial response – an immediate stop to conduct; determine the cause of conduct and extent of apparent violation; new and more effective internal controls and procedures; prevent a recurrence.
- Cooperation with OFAC – voluntary self-disclosure; similar transactions; response to requests for information; tolling agreement(s).
- Timing of apparent violation in relation to imposition of sanctions – date of apparent violations in relation to the adoption of the applicable prohibition(s).
- Other enforcement action – other federal, state or local agencies’ actions; comprehensive settlements with other agencies.
- Future compliance/deterrence effect – to promote future compliance; focus on same sector.
- Other relevant factors – case-by-case basis; totality of circumstances; proportionate response.
Substantial weight is given to factors A, B, C and D in making a determination as to whether an infraction is considered egregious. There are statutory maximum penalties for OFAC violations but the amount of the base penalty can be adjusted to reflect any of the applicable general factors. Each of the 11 general factors may also be considered mitigating or aggravating thus resulting in a lower or higher proposed penalty amount. But the base or proposed penalty amount cannot exceed the statutory maximum amount. This slide presentation from the symposium provides an overview of OFAC enforcement along with a couple of case studies.
During fiscal year 2016, there were three cases involving financial institutions that resulted in OFAC issuing a Finding of Violation. Earlier this year, OFAC announced its enforcement action against Toronto-Dominion Bank (TD Bank) with a settlement agreement and Finding of Violation for the bank’s violations of the Iranian and Cuban sanctions. TD Bank is headquartered in Toronto, Canada, but the bank and its subsidiaries processed multiple prohibited transactions through the United States. The enforcement action highlights the facts and circumstances in OFAC’s determination of its administration action.
Symposium speakers noted that OFAC is stepping up its enforcement actions. It was also emphasized that any information provided to OFAC must not be inaccurate, misleading or incomplete. And, one speaker even said, “Don’t lie to OFAC as we take it personally.”