Blog
Screening Payments for OFAC Sanctions Compliance
Contents
Avoiding Sanctions Violations: How to Screen Payments and Manage Risk
Trying to stay on top of sanctions regulations can feel like you’re navigating a maze blindfolded. Rules seem to change every other day, and even well-meaning companies can end up footing huge fines. So how do you avoid costly sanctions violations? This article breaks down practical steps any business can take to stay compliant.
What Exactly is OFAC?
First, a quick primer on the agency behind most of these rules – the Office of Foreign Assets Control (OFAC). OFAC oversees U.S. economic sanctions programs. Their job is to implement foreign policy and national security goals by restricting transactions with certain countries, groups, or individuals.
Right now, sanctions apply to places like Cuba, Iran, North Korea, and Syria. OFAC also sanctions terrorists, weapons dealers, drug traffickers, and other baddies.
Building an OFAC Compliance Program
OFAC doesn’t dictate exactly how companies should monitor sanctions risks. But they’ve outlined five must-haves for any compliance program:
- Get leadership on board – Make sure upper management provides enough resources and accountability.
- Know your weaknesses – Regularly assess where sanctions exposure might be hiding.
- Write solid policies – Have clear, comprehensive processes in place to catch issues.
- Test the controls – Audit to confirm the program matches your risk profile.
- Train the team – Ensure staff understand the regulations and your procedures.
Where Could Sanctions Risk Be Lurking?
Thorough risk assessments are key. Be systematic in evaluating potential trouble spots like:
- Countries you operate in – Do business in any sanctioned places?
- Customers and partners – Any high-risk individuals or companies?
- Products and services – Do they involve international transactions?
- Payment flows – Any exposure points with prohibited groups?
For banks and payment processors, those last two factors are especially crucial. Implementing strong screening measures for all incoming and outgoing payments is a must.
The Challenges of Faster Payments
New instant payment technologies like real-time transfers create compliance headaches. With everything moving at lightning speed, there’s less time to screen transactions pre-settlement.
Luckily, OFAC released new guidance for managing risks with faster payments. They suggest looking at factors like:
- How quick is the processing?
- What transaction data is available?
- Can you hold unsettled payments for screening?
- Is reversal possible for failed checks?
While real-time screening isn’t required, some post-settlement controls are wise for higher risk transactions. AI and machine learning can also help uncover non-obvious patterns.
Don’t Let Compliance Slip – The Costs Are Steep!
Mess up on OFAC compliance, and the penalties can be massive. Just ask banks like:
- JP Morgan – $88 million fine in 2011
- Clearstream Banking – $151 million in 2014
- PayPal – $7.7 million in 2015
Fines, penalties, damaged trust – it all adds up fast. The good news? Staying compliant gets much easier with the right prep work and vigilance.
Does sanctions screening make you break out in hives? Don’t panic. With clear policies, robust controls, and a little help from regulatory technology, compliance doesn’t have to be a nightmare. Sleep easy by taking the right precautions.