DENVER-Credit unions do not have as many interactions with OFAC as they do with Treasury Department sibling FinCEN, but ongoing vigilance is the best way to avoid fines.
That was the message from David Brummond, senior sanctions advisor for the Office of Foreign Assets Control, which is charged with denying resources to hostile foreign entities, often through sanctions. It often functions as a foreign policy toll, Brummond noted.
"Sanctions are used so frequently now, they are a response of choice in foreign policy," he said. "Just in the last two years it has expanded from U.S. persons to enemies all over the world."
OFAC is a law enforcement agency with broad subpoena powers and "very strong tools," Brummond continued. Sanctions enforcement is on a graduated scale, from a cautionary letter to civil penalties to criminal referral. General factors in determining the agency's response depends on if a violation is determined to be "willful" or "reckless," if there was awareness of conduct on the part of the financial institution, and if there was harm to sanctions program objectives.
Individual characteristics of the subject (was it large bank or a small FI?) also play a role, as does whether the entity has a compliance program and remedial response in place, Brummond said. Finally, OFAC weighs what was the response when the agency contacted the financial institution to tell it of the problem.
"In the case of a voluntary self-disclosure the penalty is less, especially if it is not an egregious case," said Brummond. "The opposite is an egregious case that the financial institution attempted to hide. That can lead to substantial fines at $250,000 per transaction, up to hundreds of millions of dollars if thousands of wire transfers were involved."
'We Are Not FinCEN'
OFAC and FinCEN are commonly confused, but Brummond there are differences in mission, statutory authority, compliance paradigm and scope. FinCEN gets its authority from the Bank Secrecy Act of 1970. FinCEN safeguards financial system from economic crime, whereas OFAC enforces sanctions based on U.S. foreign policy and national security goals.
Most relevant to CUs are compliance paradigm differences, Brummond continued. He said OFAC generally does not require FIs to confirm transactions. FinCEN requires AML affirmative reporting and compliance, including policies, procedures, internal controls for tracking and identifying financial crime, and filing of reports.
While OFAC watches people and transactions all over the world, FinCEN's scope is narrower: financial institutions, transaction thresholds and covered products.
Asked what CUs should be watching out for, Brummond said the biggest risk would be if they do a number of transactions to Iran, Syria or Cuba.
"They also should be careful of transactions going to Mexico or Central or South America," he said. "If something is suspicious, they have 10 days to report it."