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Mitigating OFAC Civil Penalty Fines
Dealing with potential civil penalties from the Office of Foreign Assets Control (OFAC) can be a scary prospect for companies and individuals. OFAC enforces U.S. sanctions laws and has the power to impose hefty fines for violations. However, there are steps you can take to mitigate penalties if you find yourself under investigation.
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Self-Disclose Potential Violations
If you discover your company or a third party you work with may have violated sanctions, voluntarily self-disclose the issue to OFAC. Self-disclosure is considered a major mitigating factor and could significantly reduce any proposed civil penalties. OFAC encourages self-reporting and has an online portal to submit disclosures at OFACDisclosures@treasury.gov [1].
For example, in a 2022 case, OFAC issued a reduced $8,000 penalty to Uphold HQ Inc. after the company self-reported sanctions violations. OFAC cited the self-disclosure as a key reason for the low fine[2]. Self-reporting shows you’re committed to compliance and transparency.
Implement a Risk-Based Compliance Program
Having a strong OFAC risk-based compliance program in place can be another mitigating factor. Make sure your policies and procedures are robust and reasonably designed to detect, prevent, and address sanctions risks. Compliance programs should be tailored to your specific business activities and clients.
OFAC will assess the adequacy of your compliance program during an investigation. The more comprehensive your compliance efforts, the more likely penalties will be reduced. Be sure staff are properly trained and there are controls for screening transactions and clients against sanctions lists.
Take Prompt Remedial Action
If a potential violation occurs, take swift action to contain the issue. Stop any prohibited transactions and prevent further dealings with sanctioned entities or individuals. OFAC will look favorably on companies who take remedial steps quickly to address problems.
You may also want to conduct an internal investigation to understand how the compliance breakdown occurred and implement fixes. Taking responsibility and showing you’re serious about preventing future issues can help reduce penalties.
Cooperate Fully with OFAC
If you receive an administrative subpoena from OFAC or the agency begins an investigation, be sure to fully cooperate. Respond to any requests for documents or information in a comprehensive and timely manner. OFAC values cooperation from parties under investigation.
You can also request a meeting with OFAC to present information about mitigating factors like your compliance program. Transparency and open communication tend to lead to better case resolutions.
Retain Experienced Legal Counsel
Navigating OFAC’s enforcement process is complex, so it’s wise to have an experienced sanctions attorney represent you. Skilled counsel can help craft your self-disclosure, interact with OFAC, and present the most compelling mitigation arguments.
An attorney can also give you an idea of what penalties to potentially expect and negotiate with OFAC for the lowest fines possible. Legal expertise goes a long way in these cases.
How OFAC Assesses Civil Penalties
OFAC publishes detailed enforcement guidelines [5] that lay out its process for investigating cases and determining civil penalties. Some key aspects include:
- OFAC considers the circumstances of each case, including any mitigating or aggravating factors.
- Base penalty amounts are set by federal regulations and adjusted annually for inflation.
- OFAC will calculate a base penalty amount according to the sanctions program violated, then adjust upwards or downwards based on case specifics.
- Statutory maximum penalties per violation range from $311,562 to $311,562,000.
- OFAC has discretion to settle cases for amounts below the minimum guidelines.
In recent years, OFAC’s civil fines have ranged from a few thousand dollars into the millions. The largest settlements generally involve egregious or willful violations by major corporations[5].
Avoiding Criminal Prosecution
In addition to civil penalties, willful sanctions violations can also lead to criminal prosecution. Criminal penalties include fines up to $1 million and imprisonment up to 20 years for individuals and fines up to $100 million for companies[6].
Maintaining a strong compliance program and self-disclosing issues to OFAC can help demonstrate violations were not willful or intentional. If violations resulted from negligence or recklessness vs. intent, the likelihood of criminal prosecution is far lower.
Key Takeaways
- Voluntarily self-disclose potential violations to OFAC.
- Implement and maintain a risk-based OFAC compliance program.
- Take prompt remedial action if violations occur.
- Fully cooperate with any OFAC investigation.
- Retain experienced counsel to engage with OFAC.
- Utilize all available mitigating factors to reduce penalties.
While facing OFAC enforcement action can be daunting, taking proactive mitigation steps and advocating your case effectively can help lead to more favorable outcomes. Companies and individuals should engage experienced sanctions counsel as early as possible when issues arise.
References
[1] https://ofac.treasury.gov/faqs/topic/1501
[2] https://ofac.treasury.gov/media/931556/download
[3] https://ofac.treasury.gov/faqs/13
[4] https://www.visualofac.com/resources/penalties/
[5] https://ofac.treasury.gov/civil-penalties-and-enforcement-information
[6] https://www.federallawyers.com/criminal-defense/ofac-civil-penalty-guidelines-explained/