What Every Business Needs to Know About OFAC Compliance

September 2018

While many people are generally aware of the U.S. Department of the Treasury’s Office of Foreign Asset Control (“OFAC”), there is a common misperception that only banks need to comply with its rules and enforcement. For businesses that have any exposure to international trade or parties, however, what you don’t know can hurt you.

When businesses deal with buyers, seller, or customers located outside the United States or U.S. residents who are foreign citizens or foreign-controlled, it is important to be aware of the Federal rules and regulations that could potentially determine if you can move forward with the transaction. OFAC is charged with the enforcement of the economic and trade sanctions of the United States and United Nations. These sanctions may prohibit or limit interactions with people, companies, or banking institutions around the world and failure to comply with the sanctions and regulations can lead to substantial penalties and fines. Similarly, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) mission is the enforcement of the Export Administration Regulations (“EAR”) as they relate to pieces of technology and equipment. If a piece of equipment is subject to the EAR (this can include certain aircraft components) or is being exported to a country listed in the EAR, then a license from the BIS may be needed to complete the transaction.

FMJ assists many clients who are conducting transactions that have an international scope with making sure they comply with the US regulations governing the transactions. Asking the right questions and knowing all of the companies or individuals involved in a transaction goes a long way to determining you can move forward with a transaction. Including a requirement for disclosure of such information needed to clear these hurdles helps this process. Once the information from the other party is received, a proper investigation is needed and obtaining a BIS license may be required depending on the transaction.

FMJ has experience working with clients with customers across the globe to ensure compliance with OFAC obligations. It can be unsettling to receive an investigative inquiry or subpoena from OFAC looking into business activities with international customers. If that happens, it is important to have a paper trail demonstrating the legitimate business activities with the customer and, ideally, compliance with company crafted OFAC policies to ensure conformity with OFAC obligations. FMJ has helped its clients through the process of collecting the relevant information and crafting responses to the government’s questions. Just as importantly, FMJ can help its clients get ahead of any potential problem by auditing, drafting, or revising company OFAC policies and provide training as to compliance procedures to help avoid potential future issues.

If you are transacting international business or have customers with international ties or who are international citizens you should be aware of the OFAC and BIS regulations. FMJ can assist you with complying with these regulations, creating a policy that works for you, and responding to any concerns that come up. For more information related to complying with the OFAC and BIS regulations contact Kevin Johnson (kevin.johnson@fmjlaw.com).