Evaluating Risk, Choosing Counsel, and Other Key Considerations for OFAC Sanctions Investigations - Federal Lawyer
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Evaluating Risk, Choosing Counsel, and Other Key Considerations for OFAC Sanctions Investigations

OFAC Sanctions Investigations

The Office of Foreign Assets Control (OFAC) administers various sanction programs to prevent transactions with certain foreign nations, entities, and individuals. Financial institutions, companies, and individuals in the United States must strictly comply with OFAC’s sanctions; and, if they fail to do so, they can face steep consequences.

These consequences can include civil fines or criminal fines and prison time depending on the specific issue(s) involved.

With this in mind, when targeted in OFAC sanctions investigations, U.S. financial institutions, companies, and individuals need to make informed decisions. They also need to execute a proactive, strategic, and targeted defense. This involves several preliminary considerations, from evaluating the risks at hand to choosing experienced defense counsel.

“OFAC sanctions investigations present several risks for the entities and individuals targeted in these inquiries. Not only can sanction violations trigger civil or criminal penalties, but they can also increase entities’ and individuals’ risk of facing additional scrutiny from OFAC in the future. As a result, a strategic defense is paramount, and targets of OFAC investigations must be prepared to show that they are taking appropriate steps to effectively manage sanctions compliance.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.

For targets of OFAC sanctions investigations, a swift reaction is paramount. While it is possible to get out in front of an OFAC investigation and steer it toward a favorable resolution, doing so requires a clear understanding of the relevant facts and law, knowledge of OFAC’s enforcement priorities and tactics, and awareness of the potential pitfalls involved. This means that targets need experienced defense counsel, and they need to make an informed decision about their choice of an OFAC sanctions attorney.

Evaluating Risk During an OFAC Sanctions Investigation

One of the keys to making informed decisions during an OFAC sanctions investigation is understanding the risks involved. When dealing with alleged OFAC sanction violations, the risks involved depend on the specific sanctions program (and sanction) at issue, the applicability of any general or specific licenses, prior communications with OFAC, and the target’s compliance efforts—among many other factors.

These factors will determine whether any charges flowing from OFAC’s investigation are civil or criminal in nature, and they will determine the specific statutory provisions under which the U.S. Department of Justice (DOJ) can pursue charges. For reference, some example of potential penalties in OFAC sanction violation cases include:

  • Civil fines ranging from approximately $90,000 to more than $300,000 per violation under the Trading with the Enemy Act (TWEA) and the International Emergency Economic Powers Act (IEEPA)
  • Civil fines of $1.5 million under the Foreign Narcotics Kingpin Designation Act (the “Kingpin Act”)
  • Criminal fines of $1 million or more and up to 20 years of federal imprisonment per OFAC sanction violation

Again, these are just examples, and whether an investigation is civil or criminal in nature will play a huge role in determining the risks involved. Of course, the target’s ability to execute an effective defense strategy is critical as well, and this is where engaging an experienced OFAC sanctions attorney comes into play.

Choosing an OFAC Sanctions Attorney for Your (or Your Financial Institution’s or Company’s) Defense

Given these risks—and the unique challenges involved in successfully defending against an OFAC sanctions investigation—experienced legal representation is paramount. Targeted entities and individuals must choose their defense counsel wisely, and they must focus on choosing an attorney and firm with the experience, team, and resources required to respond to allegations of OFAC sanction violations effectively.

With this in mind, here are some key considerations for choosing an OFAC sanctions attorney for your (or your financial institution’s or company’s) defense:

  • Focus on Federal Compliance and Defense – When dealing with any type of OFAC sanctions matter, it is important to choose an attorney who focuses in the areas of federal compliance and defense. As discussed below, while relevant OFAC experience is paramount, OFAC sanctions investigations can lead to scrutiny from other federal law enforcement agencies as well.
  • Specific OFAC Experience – Dealing with OFAC presents unique challenges, and successfully defending against allegations of OFAC sanctions violations requires a clear understanding of OFAC’s sanctions programs, license guidelines, and enforcement practices and priorities. As a result, all targeted entities and individuals should choose counsel with specific (and extensive) OFAC experience. Ideally, this will include experience not only experience as defense counsel, but also prior experience prosecuting OFAC sanction violations for the federal government.
  • Favorable Results in OFAC Sanctions Matters – When inquiring about an attorney’s relevant experience, it is also important to inquire about the attorney’s results in OFAC sanctions matters. While an OFAC sanctions attorney won’t be able to discuss the details of prior engagements specifically, he or she should be able to provide a general summary of prior engagements and their outcomes.
  • Availability and Accessibility – When facing scrutiny from OFAC in relation to an alleged sanction violation, you don’t have time to waste. You need defense counsel who can get to work immediately, and who will be accessible 24/7 during the early stages of the investigation.
  • Firm Resources and Personnel – Defending against alleged OFAC sanction violations is a substantial undertaking that requires a team of qualified professionals with the resources needed to match OFAC’s. As a result, when choosing an OFAC sanctions attorney, it is important to research the attorney’s firm as well.
  • Nationwide and International Capabilities – Due to the nature of OFAC sanctions matters, executing an effective defense often requires national or international capabilities. This is important to consider when researching attorneys and firms as well.
  • Representation for OFAC Compliance and OFAC Sanctions Defense – Finally, while defending against OFAC’s investigation may be your immediate priority (and rightly so), it is also important to think about the future. When choosing an OFAC sanctions attorney, it is also important to consider whether the attorney (and his or her firm) are capable of providing OFAC compliance representation on an ongoing basis.

While these aren’t necessarily all of the factors you will want to consider when choosing an OFAC sanctions attorney, they are among the most important. Once you find an attorney and firm with the requisite practice focus, experience, and capabilities, your next step is to schedule an initial consultation at which you can discuss your needs one-on-one and determine if you are comfortable moving forward with an engagement.

Identifying Viable Defenses and Executing a Comprehensive Defense Strategy

After you choose an OFAC sanctions attorney, you will need to begin working with your attorney immediately to identify viable defenses. Based on the defenses you have available, you will then need to rely on your attorney to execute a comprehensive defense strategy focused on achieving a favorable outcome in light of the circumstances at hand. Depending on the circumstances, this may involve demonstrating to OFAC that you (or your financial institution or company) has fully complied with all pertinent laws and regulations, or it may involve working with OFAC to find a mutually agreeable resolution that allows you to move forward without facing civil or criminal charges.

Of course, facing civil or criminal charges is also a possibility. While it will often be possible to resolve OFAC sanctions investigations favorable without charges being filed, sometimes this simply won’t be possible. If it appears likely that OFAC’s investigation will lead to charges, then you will need to work with your OFAC sanctions attorney to structure your defense strategy accordingly.

Managing OFAC Sanctions Compliance On an Ongoing Basis

While some individuals may have isolated encounters with OFAC, for financial institutions and companies, it is generally necessary to manage OFAC sanctions compliance on an ongoing basis. If your institution’s or company’s OFAC compliance program is adequate—and if your OFAC sanctions attorney can prove it with the documentation you have on hand—this may be all that is needed to bring OFAC’s investigation to a quiet and favorable end.

But, even if this is the case, managing OFAC sanctions compliance going forward will still require a proactive approach. OFAC routinely modifies existing sanctions and licenses, enacts new sanctions and licenses, and shifts its enforcement priorities. Thus, as mentioned above, when choosing counsel for OFAC sanctions defense, it is important to do so with an eye toward your financial institution’s or company’s ongoing compliance needs as well.

Managing Additional Risks Related to OFAC’s Investigation

As also mentioned above, when choosing counsel for OFAC sanctions defense, it is important not to focus solely on OFAC’s inquiry. In many cases, OFAC investigates financial institutions and companies in tandem with the DOJ, U.S. Securities and Exchange Commission (SEC), and other federal agencies. As a result, as you consider your representation needs, you may also need to consider attorneys’ and firms’ experience in federal civil and criminal litigation involving the DOJ, SEC investigations and enforcement proceedings, and other relevant areas.

Ultimately, the key to mitigating risk during an OFAC sanctions investigation is informed decision-making. This starts with your choice of legal representation. With an experienced OFAC sanctions attorney advising you, you can be confident in your decision-making, and you can move forward with a strategic plan to avoid future allegations and liability for OFAC sanction violations.

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