Fight terrorism: Check the OFAC list
Fight terrorism: Check the OFAC list
Companies that check sanctions lists aren’t just fulfilling their legal obligations – they’re also avoiding risks to their business and safeguarding their public image. The longer-term aim is to combat terrorist activities worldwide. Aside from EU sanctions lists, European companies should also take note of US sanction lists. For many companies, including the OFAC list in their audit is rightly regarded as essential to ensure maximum safety and security.
What is a sanction list?
A sanctions list is a publicly accessible directory of companies, organizations, or individuals upon whom economic and/or legal restrictions have been imposed. It is prohibited to do business with companies, organizations, or individuals under sanction. The purpose of sanctions lists is to combat international terrorism by depriving individuals, organizations and institutions associated with terrorist activity of funds and economic resources. Economic resources include services, goods, rental arrangements, and the transfer of property or technology. Counter-terrorism sanctions were intensified in the wake of the September 11 terror attacks. Companies, organizations, and individuals suspected of having links to terrorism have been subject to increased checks since this time.
What is the OFAC list?
The OFAC Sanctions List is released by the Office of Foreign Assets Control (OFAC). The OFAC is a supervisory authority of the United States Department of the Treasury, which administers and enforces economic trade sanctions against states, organizations and individuals. These sanctions are based on current US foreign policy and national security objectives. The OFAC list safeguards US foreign policy objectives while protecting international trade both within the US and abroad from terrorist acts and illegal trading in arms and drugs.
Sanctioned persons, companies, or organizations are described by OFAC as Specially Designated Nationals (SDNs) and included in the SDN list. The assets of SDNs are frozen and doing business with these blocked persons is also prohibited. The current SDN list can be accessed via the OFAC website.
Current sanctions against Russia and Belarus
From the exclusion of Swift to the banning of Russian state media: Since the attack by Russian troops on Ukraine in the night of 24 February 2022, the West, in particular the European Union (EU) and Switzerland, but also the G7 states, have imposed numerous sanctions against Russia as well as Belarus. With sanctions in the areas of finance, energy and transport as well as massive restrictions against Russian and Belarusian individuals and institutions, the West is pursuing the goal of massively weakening the economy in Russia and the political elite behind Putin.
Good to know: The EU has imposed a total of five sanctions packages so far.
An overview of the current sanctions list:
- Financial Sector
- Sanctions against Russian banks, in particular against the Russian Central Bank: complete ban on financing and freezing of assets
- It is also prohibited to directly or indirectly provide funds or assets to the Russian political elite
- Exclusion of several Russian banks from the international financial communication system Swift
- the EU blocks Russia's foreign exchange reserves and increases borrowing costs
- Energy sector
- Export bans on certain goods and technologies for oil refining
- Far-reaching ban on new investments in the entire Russian energy sector
- Supply bans on European equipment for the energy industry
- the United States has banned gas and oil exports from Russia
- Ban on the purchase, import or transport of coal and other solid fossil fuels into the EU if they originate in or are exported from Russia
- Trade sector
- Withdrawal of Russia's most-favoured-nation status at the World Trade Organisation (WTO)
- Export ban on dual-use goods
- Bans on imports of steel products
- Export ban on luxury goods, with a commodity value of over 300 euros
- Transport sector
- Export ban on goods, technologies and services for the aerospace industry
- European, Canadian and US airspace closed to Russian aircraft
- Ban on ships registered under the Russian flag from calling at EU ports
- Technology sector
- Limited access to important key technologies
- USA bans export of high-tech products to Russia
- EU bans broadcasting of Russian state media Russia Today (RT) and Sputnik
- People & Facilities
- Sanctions against Russian officials, businessmen, journalists, politicians and big businessmen (oligarchs) and their family members
- Assets of major Russian entrepreneurs frozen
- Large-scale entry and visa bans for Russian oligarchs and their family members
More countries follow the Western measures
While Switzerland and Norway follow the EU on Russia sanctions, the United States suspends normal trade relations with Russia until further notice. Japan bans the export of oil processing equipment to Russia. South Korea and Singapore also freeze assets of oligarchs and ban all business contacts and transactions with Russia.
Canada, New Zealand and Australia impose special tariffs on the import of all goods from Russia and also impose entry bans. The United Kingdom has also imposed far-reaching sanctions on trade in goods and banned the export of various goods and services in this regard.
LexisNexis offers companies best due diligence software practical tools to automatically query all official sanctions lists * . All sanctions are built into the LexisNexis risk and compliance check tools 24 hours after they come into force.
Perform due diligence:
Who is obliged to check sanctions lists?
Every company, regardless of its size or industry, is obliged to make reasonable efforts to prevent terrorism. In line with these due diligence obligations, every company must carry out risk and compliance checks on its business partners. This applies not just to new business relationships (onboarding due diligence), but also long-standing business relationships (ongoing due diligence). This must be logged accordingly.
Why do sanctions lists have to be checked?
A sanctions list check is required to perform business transactions in a legally compliant manner. Failure to carry out these checks may have legal consequences. If sanctions lists are ignored and sanctioned persons, companies, or organizations go on to receive financial or economic resources, this can lead to heavy fines or even imprisonment. The managers of a company are the primary subjects of such fines or sentencing in the event of a transgression. In some cases, the people responsible for exports within the company may be threatened with such a fine or sentence.
There are also economic and financial risks to your company in the event of non-compliance, meaning that sanction list checks are also part of effective risk management. The extent of this risk can be demonstrated by the case of Deutsche Forfait AG. In February 2014, the company, and Ulrich Wippermann in particular (a member of the publicly listed company’s board of directors), was accused of having conducted oil transactions with the National Iranian Oil Company (NIOC) – a company already subject to sanctions. As a result, many customers considered it too risky to work with Deutsche Forfait AG, as there was a high risk of being added to the OFAC list themselves. The non-compliance with Iran sanctions led to an estimated financial loss of €150 to 200 million for the company, which is also why the company filed for insolvency in September 2015. Aside from non-compliance with the company’s legal obligations, the company’s public image will also be damaged by any violation.
Ensure compliance at all times: When do sanctions lists have to be checked?
Your company is obliged to check sanctions lists when entering into a new business relationship. However, it is also essential to review existing business relationships on an ongoing basis to ensure that no financial or economic resources end up in the hands of sanctioned persons.
How often do sanctions lists have to be checked?
The obligation to check does not include any indication of how often sanctions lists must be checked. Nevertheless, a general principle applies: In both economic and technical terms, reasonable effort must be made to prevent sanctioned companies, organizations, or individuals from obtaining financial or economic resources. This is why it is important that you check sanctions lists, sanctions programs, nationals lists, consolidated sanctions, sectoral sanctions on an ongoing basis, as these are regularly expanded and updated. The ideal solution would be for sanctions lists checks to run automatically in the background of your ERP or CRM system. This ensures full risk and compliance checks are carried out to minimize your risks.
Regardless of whether you find something during the check, it is important to keep a record of your due diligence checks using due diligence software to show that you have fulfilled your due diligence obligations. It is also essential to keep a log of the checks performed and results generated for your records.
Which sanctions lists need to be checked?
According to EU regulations and the Foreign Trade and Payments Act, every company that is resident or economically active within the EU is obliged to check the European Common Foreign and Security Policy (CFSP) list. The CFSP lists individuals, organizations, financial institutions and companies against whom the EU has imposed financial sanctions. This list combines all the lists of names associated with counter-terrorism directives as well as the country-specific embargo regulations like nationals list, sanction programs, consolidated sanctions and sectoral sanctions. The CFSP is the most important sanctions list for companies based in or economically active within the EU. The current CFSP list is available online.
On top of this, companies based in the EU are also expected to observe US sanctions lists. The United States demands global compliance with its export control legislation, which is why you must check with due diligence software whether your company’s activities are subject to US jurisdiction. Where this is the case, you must include US sanctions lists in your checks – also to exclude negative economic consequences, since US sanctions are the most wide-reaching in economic terms. You can check whether your business activities fall under US jurisdiction using due diligence software by asking yourself the following four questions:
- Are you handling US products (either directly or indirectly)? For example, do you use US products in the manufacturing of your goods, or do you trade products originating from the United States?
- Are your products subject to US export control legislation?
- Does your company have a US-based subsidiary, or are you a US-based subsidiary of another company?
- Are US citizens responsible for your company’s exports?
How can sanctions lists be checked?
There are no legal stipulations regarding how you should check sanctions lists. As a company, however, you face the challenge of finding a means to check the various sanctions lists in a way that is both thorough and cost-effective, and without disrupting your day-to-day business. The high number off sanctions lists to be checked means that manual checks would be complex and time-consuming. It makes sense to find an automated solution to perform these compulsory checks.
BatchNameCheck - a third-party due diligence software offers the ability to batch check names against lists, allowing you to meet your due diligence obligations both when entering into new business relationships (onboarding due diligence) and on an ongoing basis (ongoing due diligence). BatchNameCheck automatically generates daily results reports for checks run against lists of people and companies you work with or intend to work with. This enables you to identify risky business partners and comply with national and international compliance legislation and guidelines. Automated checking of sanctions lists protects your company and minimizes compliance risks. When onboarding or ongoing due diligence screenings reveal individual negative hits, these can be examined more closely using the Nexis Diligence® - an online due diligence software tool as part of your enhanced due diligence processes.
Rolling out a risk and compliance check tool to verify business partners is a vital step towards meeting your legal obligation to check sanctions lists. But for true compliance, it is equally important to raise awareness of sanctions lists among all employees. OFAC itself underlines this aspect in its Framework for OFAC Compliance Commitments. This sets out five key components that OFAC believes every compliance program should meet.
- Management commitment
Management must support a risk-based compliance program and exemplify correct behavior, setting the tone from the top. Appointing an OFAC sanctions officer is recommended.
- Risk analysis
Third-party inspections must be carried out at regular intervals. Customers, suppliers, products, services and geographical locations must all be assessed for potential risk.
- Internal compliance requirements and checks
Guidelines and checks set out appropriate procedures and minimize risks.
- Independent tests and audits
Regular audits should identify and remedy weaknesses in the program.
Training employees – and, where appropriate, customers and suppliers – ensures proper understanding of the risks of disregarding sanctions lists among all involved.
This article is provided solely for information purposes. LexisNexis makes no guarantees as to its completeness or accuracy.
Frequently Asked Questions
Answers to some popular questions
A sanctions list is a publicly accessible directory of companies, organizations, or individuals upon whom economic and/or legal restrictions have been imposed. It is prohibited to do business with companies, organizations, or individuals under sanction.
The OFAC Sanctions List is released by the Office of Foreign Assets Control (OFAC). The OFAC list safeguards US foreign policy objectives while protecting international trade both within the US and abroad from terrorist acts and illegal trading in arms and drugs.
Every company, regardless of its size or industry, is obliged to screen both their new relationships as well as existing relationships for sanctions.
A sanctions list check is required to perform business transactions in a legally compliant manner. Failure to carry out these checks may have legal consequences. If sanctions lists are ignored and sanctioned persons, companies, or organizations go on to receive financial or economic resources, this can lead to heavy fines or even imprisonment. There are also economic and financial risks to your company in the event of non-compliance, meaning that that sanction list checks are also part of effective risk management.
The ideal solution would be for sanctions lists checks to run automatically in the background of your ERP or CRM system. This ensures full checks are carried out to minimize your risks.
According to EU regulations and the Foreign Trade and Payments Act, every company that is resident or economically active within the EU is obliged to check the European Common Foreign and Security Policy (CFSP) list. The CFSP lists individuals, organizations, and companies against whom the EU has imposed financial sanctions. This list combines all the lists of names associated with counter-terrorism directives as well as the country-specific embargo regulations. The CFSP is the most important sanctions list for companies based in or economically active within the EU. The current CFSP list is available online.
As a company, you face the challenge of finding a means to check the various sanctions lists in a way that is both thorough and cost-effective, and without disrupting your day-to-day business. Thus, a proficient software is required to run the screening in the background automatically. Read how.
It is dependant on the country you belong to and the sanctions list applicable to you. You can check that on our solution specifically designed to run a sanctions check for you. Click here to know more.
The OFAC sanctions list is important to avoid working with entities and people who are non-compliant. Companies are also avoiding risks to their business and safeguarding their public image. The longer-term aim is to combat terrorist activities worldwide.