Criminal Defense Lawyers

Responding to an OFAC Compliance Investigation

Dealing with an OFAC (Office of Foreign Assets Control) compliance investigation can be intimidating. But with the right preparation and approach, you can get through it. This article provides practical tips and info to guide you through the process.

What Triggers an OFAC Investigation

There are a few common triggers for an OFAC investigation^[1]:

• Blocking reports filed by financial institutions
• Company self-disclosures of potential violations
• Tips from competitors or disgruntled employees
• Information sharing from other government agencies
• OFAC’s own research and monitoring efforts

So if your company files a blocking report, makes a voluntary self-disclosure, or is the subject of a tip, expect OFAC to come knocking.

The Investigation Process

The OFAC investigation process typically involves^[2]:

1. An administrative subpoena requesting info
2. Your written response to the subpoena
3. Follow-up info requests from OFAC
4. A final enforcement action (or no action)

After receiving a subpoena, you’ll need to respond within 30 days (though extensions are common). OFAC will review your response and likely request clarification or additional documents. This back-and-forth may repeat several times over months or years.

OFAC’s final action depends on the nature and severity of any violations, using factors like:

• Willfulness or recklessness
• Harm or risk of harm to sanctions program objectives
• Awareness of conduct at issue
• Compliance program strength
• Remedial response

Responding to the Subpoena

Carefully responding to the initial OFAC subpoena is crucial. Some tips:

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• Don’t ignore or delay – respond promptly within the 30 day deadline
• Be comprehensive – leave no requested stones unturned
• Take it seriously – this is your chance to make a good first impression
• Consider hiring legal counsel to assist with the response
• Provide organized, indexed, searchable data^[3]
• Clearly explain any tech difficulties in collecting data
• Use the response as an opportunity to demonstrate your willingness to cooperate fully

A well-organized, timely, transparent subpoena response lays the groundwork for the best possible outcome.

Cooperating with OFAC

Maintaining a cooperative working relationship with OFAC throughout the investigation is key. This means^[4]:

• Being responsive – reply to all OFAC requests timely
• Staying engaged – maintain an open dialogue with investigators
• Being transparent – don’t hide anything; err on side of oversharing
• Explaining any delays or difficulties in providing info
• Making earnest efforts to resolve OFAC’s concerns

The more responsive, engaged, and transparent you are, the more likely OFAC will treat you leniently if violations occurred.

Potential Investigation Outcomes

There are a range of potential outcomes from an OFAC investigation^[5]:

• No Action – OFAC finds insufficient evidence of violations
• Cautionary Letter – OFAC identifies concerning activity but doesn’t penalize
• Finding of Violation – OFAC determines a violation occurred but issues no penalty
• Civil Monetary Penalty – A fine based on violation severity
• Referral for Criminal Charges – Egregious sanctions evasion or deception may lead to criminal prosecution

Over half of OFAC investigations end with no action or just a cautionary letter. So violations don’t necessarily mean you’ll incur penalties if you cooperate fully.

Best Practices for a Positive Outcome

Follow these best practices to maximize your chances of a positive OFAC investigation outcome:

• Respond to the subpoena completely and promptly
• Be transparent; provide all relevant info even if not explicitly requested
• Stay engaged and cooperative with OFAC throughout
• Explain any difficulties in detail; don’t appear evasive
• Emphasize your sanctions compliance program improvements
• Express willingness to settle any concerns
• Stay calm and consult counsel experienced with OFAC

With preparation, cooperation, and the right help, you can resolve an OFAC investigation with minimal pain.

Takeaways

• Move quickly to respond to OFAC subpoenas comprehensively
• Maintain an open, cooperative dialogue with investigators
• Emphasize compliance program enhancements and settlement willingness
• Penalties aren’t guaranteed; over half of cases end without them
• Document everything thoroughly – keep meticulous records of all correspondence and information provided
• Be proactive with compliance before issues arise – don’t wait for an investigation to optimize compliance
• Designate an internal point person to coordinate response – don’t let the process fall between the cracks
• Consider seeking OFAC’s guidance in advance if unsure of obligations
• Self-disclose issues appropriately – OFAC may look more favorably on voluntary disclosures

With the right preparation and mindset, an OFAC investigation doesn’t have to be feared. View it as an opportunity to showcase your compliance program and willingness to collaborate. And consult experienced counsel to make the process as painless as possible.

References

[1] When You Got It, Flaunt It: Enforcement Authorities Expect Companies, Including Banks and Cryptocurrency Exchanges, That Collect Geolocation Data to Use It for Sanctions Compliance

[2] U5L1-Spell-Checker.xml – The Beauty and Joy of Computing

[3] Sr. Sanctions Compliance Program Manager – Paxos

[4] the of and to a in for is on s that by this with i you it not – Massachusetts Institute of Technology

[5] [PDF] Case 1:18-mc-00176-BAH *SEALED* Document 61-11 Filed 08/12/20 Page 1 of 40 – United States District Court for the District of Columbia