OFAC compliance internal controls play a pivotal role in ensuring that businesses adhere to international sanctions and avoid potentially severe regulatory penalties.
An effective internal controls system includes policies and procedures to identify, interdict, escalate, report, and keep records on activity that may be prohibited by the regulations and laws administered by authorities.
Internal controls aim to outline clear expectations, define procedures and processes for OFAC compliance, and minimize the risks identified by the organization’s risk assessments. Policies and procedures should be enforced, weaknesses should be identified and remediated, and internal and/or external audits and assessments of the program should be conducted periodically.
Given the dynamic nature of US economic and trade sanctions, a successful and effective sanction compliance program should be capable of adjusting rapidly to changes published by OFAC. These include:
Updates to OFAC’s List of Specially Designated Nationals and Blocked Persons, the SDN List, the Sectoral Sanctions Identification List, and other sanctions lists;
New, amended, or updated sanctions programs or prohibitions imposed on targeted foreign countries, governments, regions, or persons through the enactment of new legislation, the issuance of new Executive orders, regulations, or published OFAC guidance; and
The issuance of general licenses.
The OFAC Compliance Internal Controls
OFAC compliance programs generally include internal controls, including policies and procedures, to identify, interdict, escalate, report, and keep records about activity that the sanctions programs administered by OFAC prohibit. Internal controls aim to outline clear expectations, define procedures and processes for compliance, and minimize the risks identified by an entity’s risk assessments.
The organization has designed and implemented written policies and procedures outlining the SCP. These policies and procedures are relevant to the organization, capture the organization’s day-to-day operations and procedures, and are designed to prevent employees from engaging in misconduct.
The organization has implemented internal controls that adequately address its risk assessment and profile results. These internal controls should enable the organization to clearly and effectively identify, interdict, escalate, and report to appropriate personnel within the organization transactions and activities that OFAC may prohibit.
The organization enforces the policies and procedures it implements as part of its OFAC compliance internal controls through internal and/or external audits.
The organization ensures that its OFAC-related recordkeeping policies and procedures adequately account for its requirements according to the sanctions programs administered by OFAC. The organization ensures that its internal controls about sanctions compliance identify and implement compensating controls until the root cause of the weakness can be determined and remediated.
The organization has communicated the policies and procedures to all relevant staff, including personnel within the compliance program, relevant business segments operating in high-risk areas, and external parties performing SCP responsibilities on behalf of the organization.
The organization has appointed personnel to integrate the SCP’s policies and procedures into the daily operations of the company or corporation. This process includes consultations with relevant business units and confirms the organization’s employees understand the policies and procedures.
Final Thoughts
An effective internal controls system is paramount for organizations aiming to remain compliant with the ever-evolving US economic and trade sanctions governed by OFAC. Such a system encompasses meticulously crafted policies and procedures that not only identify and address potentially prohibited activities but also escalate, report, and keep meticulous records of them. With the constantly updated sanctions lists and new directives issued by OFAC, organizations must adopt a proactive approach, ensuring their compliance programs are agile, responsive, and aligned with the latest regulations.
Crucially, the real efficacy of these policies and procedures hinges on their enforcement, periodic assessment through internal or external audits, and seamless communication to all relevant stakeholders. An organization’s commitment to OFAC compliance is further underscored by its dedication to training and integrating these directives into its daily operations, fostering an environment of awareness, vigilance, and adherence.
