OFAC Attorney for Compliance & Economic Sanctions Defense
Former OFAC Prosecutor & Former OFAC Agent Working Closely with International Businesses Subject to OFAC Regulations & Economic Sanctions
OFAC Team Lead
Former OFAC Prosecutor
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OFAC Team Lead (EU)
Germany, France & Brazil
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OFAC Team Expert
Former OFAC Agent
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The Office of Foreign Assets Control (OFAC) is a division of the United States Treasury that is responsible for imposing and enforcing a broad range of sanctions against parties identified as posing a threat to the national security, foreign policy or economy of the United States. Any person or organization that is either a U.S. citizen or owns property in the United States is subject to OFAC regulation. However, the laws and regulations enforced by OFAC attorneys are constantly changing, making it challenging for businesses to understand their obligations.
If your business is under investigation by OFAC, or there is reason to believe that your business is not in full compliance, it is imperative that you seek an experienced OFAC compliance attorney. At Oberheiden, P.C., we’ve assembled a veteran team of experienced OFAC attorneys and former federal agents to help companies better understand what is expected of them. We work closely with organizations across all industries to create comprehensive OFAC compliance programs that can keep your business out from under the federal government’s microscope.
At first glance, it’s easy to assume that because OFAC deals with major national security threats such as terrorism and international drug smuggling, most businesses do not need to worry about OFAC compliance. However, part of OFAC’s mandate is to investigate U.S. companies that do business overseas. Thus, it is important for any company that has customers or suppliers abroad to take the necessary steps to develop an OFAC compliance program.
The following are situations that, if present, require an OFAC compliance program:
- A business regularly deals with an individual, organization or country on the OFAC sanctions list;
- A business conducts a large amount of business abroad;
- A business experiences a changing customer base due to a merger or acquisition;
- A business provides electronic products and services; and
- A business has previously been cited for a violation or had a past encounter with OFAC.
At Oberheiden, P.C., our OFAC compliance attorneys have extensive experience working with all types of organizational clients, ensuring that they operate within the bounds of the OFAC laws and regulations.
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Economic Sanctions Defense
OFAC administers several economic sanctions programs that are designed to control—and in many cases prevent—commercial and financial transactions involving entities and individuals in foreign countries. U.S. banks and other domestic entities must comply with these sanctions at all times, whether this means avoiding prohibited transactions or conducting restricted transactions pursuant to a general or specific OFAC license.
Violating OFAC’s economic sanctions can have severe consequences. U.S. banks and businesses can face asset freezes, federal investigations, and even criminal prosecution in many cases. As a result, all U.S. entities having involvement with cross-border transactions that implicate OFAC sanctions need to prioritize OFAC compliance. They also need to be prepared to defend themselves effectively when accused of violating OFAC’s economic sanctions.
Understanding the Different Types of OFAC Economic Sanctions
When facing OFAC enforcement action, a key first step is to identify the specific sanction (or sanctions) your business or financial institution is alleged to have violated. Within OFAC’s economic sanctions programs, there are numerous individual sanctions, and each has its own specific set of prohibitions—as well as its own unique set of exceptions and exemptions. To execute an effective OFAC economic sanctions defense, it is imperative to identify the sanction (or sanctions) at issue, because this will determine what defenses are available.
Generally, OFAC’s authority to impose economic sanctions on foreign entities and nations comes from two statutes. The first is the Trading with the Enemy Act (TWEA). Enacted in 1917, the TWEA gives the President the authority to restrict trade between the U.S. and its enemies in times of war. However, in practice, today the imposition and enforcement of economic sanctions under the TWEA often extend far beyond the statute’s original intent when it was enacted more than a century ago.
The second statute is the International Emergency Economic Powers Act (IEEPA). The IEEPA further expands the executive branch’s authority to impose economic sanctions outside of wartime. It is due to the IEEPA that we have many of the economic sanctions that are in place today—and in many cases defending against alleged economic sanctions violations will involve asserting defenses under the IEEPA and its enabling regulations.
Enacted in 1977, the IEEPA has undergone several significant amendments that have both broadened its scope and enhanced the federal government’s enforcement authority. For example, in 1996 Congress amended the IEEPA to penalize attempted violations of economic sanctions imposed under the statute, and in 2007 Congress increased the civil and criminal penalties for non-compliance. Under the 2007 amendments, criminal violations of the IEEPA carry up to a $1 million fine and 20 years of federal imprisonment.
OFAC’s Economic Sanctions Programs
OFAC currently maintains four broad economic sanctions programs. As noted above, within each of these programs, there are numerous sanctions with which U.S. financial institutions and businesses may need to comply. At Oberheiden P.C., we help U.S. financial institutions and businesses identify applicable sanctions and establish compliance, and we also serve as defense counsel for OFAC enforcement matters under all four economic sanctions programs.
OFAC’s economic sanctions programs are:
1. Country-Based Economic Sanctions
Currently, OFAC has country-based economic sanctions in place that restrict or prohibit trade with 18 countries around the world. Some of these sanctions apply to the subject nation as a whole, while others apply to specific types of transactions or market sectors (we discuss OFAC’s sector-based sanctions in greater detail below). OFAC’s current country-based economic sanctions include:
- Afghanistan-Related Sanctions
- Belarus Sanctions
- Burma Sanctions
- Chinese Military Companies Sanctions
- Cuba Sanctions
- Ethiopia-Related Sanctions
- Hong Kong-related Sanctions
- Iran Sanctions
- Nicaragua-related Sanctions
- North Korea Sanctions
- Russia-related Sanctions (including Global Magnitsky Sanctions and Russian Harmful Foreign Activities Sanctions)
- Somalia Sanctions
- Sudan, Darfur, and South Sudan-related Sanctions
- Syria Sanctions
- Ukraine/Russia-related Sanctions
- Venezuela Sanctions
In many cases, OFAC has adopted general licenses that allow certain types of economic activity with government entities and/or private businesses in these countries. As a result, in many cases, executing an effective economic sanctions defense will involve showing that an OFAC general license applies. With that said, to avoid prosecution for violating a country-based economic sanction based on a general license defense, it is generally necessary to prove that the transaction was structured and executed with a specific general license in mind.
2. Smart Sanctions
Smart sanctions, also known as list-based sanctions, are designed to target specific types of threats rather than specific countries (or entities affiliated with specific countries). OFAC’s smart sanctions fall into five broad categories:
- Counterterrorism Sanctions
- Cyber-related Sanctions
- Genocide and Human Rights Abuse Sanctions
- Transnational Organized Crime Sanctions
- Weapons Proliferation Sanctions
Within these five broad categories, OFAC’s smart sanctions target specific individuals, businesses, and other entities labeled as Specially Designated Nationals or Blocked Persons (SDNs). As OFAC explains, SDNs’ “assets are blocked and U.S. persons are generally prohibited from dealing with them.”
OFAC’s SDN List is publicly available, and OFAC expects all U.S. financial institutions and businesses to have adequate compliance mechanisms in place to prevent transactions with SDNs. Similar to OFAC’s country-based sanctions, its smart sanctions are also subject to various general licenses, and U.S. entities seeking to do business with SDNs can obtain specific licenses in some cases. Also similar to OFAC’s country-based sanctions, demonstrating compliance with a general or specific license will be a key defense strategy in many cases involving alleged violations of OFAC’s smart sanctions as well.
3. Sector-Based Sanctions
The third type of OFAC economic sanction is the sector-based sanction. These sanctions do not target specific nations or specific entities, but rather specific sectors of trade with entities located within a designated country.
For example, OFAC has adopted sector-based sanctions (or sectoral sanctions) that apply to Ukraine. The first of these sections came to be in connection with Russia’s annexation of Crimea in 2014. In connection with the Russian war in Ukraine, OFAC has been particularly active in monitoring economic activities with Russian entities in Ukraine, and transactions that appear to implicate OFAC’s sector-based sanctions are highly likely to trigger intensive scrutiny.
4. Secondary Sanctions
Secondary sanctions expand the burdens of OFAC compliance (and, in turn, enhance financial institutions and other entities’ risk) by imposing sanctions on entities that are affiliated or do business with SDNs. OFAC’s secondary sanctions program is relatively new; and, as a result, at present there are relatively few secondary sanctions in place. However, OFAC’s recent implementation of secondary sanctions also suggests that additional sanctions under this program will likely be forthcoming.
Defending Against OFAC Investigations Involving Alleged Economic Sanction Violations
Regardless of the specific economic sanction involved, facing an OFAC investigation is a high-risk matter that requires a skilled and strategic approach. At Oberheiden P.C., our economic sanctions defense lawyers rely on extensive relevant experience to protect our clients—including financial institutions, businesses, and individuals—against unnecessary consequences.
If you are facing an OFAC investigation, our lawyers can step in and deal with OFAC on your behalf. We can also quickly conduct a comprehensive audit to evaluate the issues involved and determine what defenses we can assert to resolve the investigation as favorably as possible. From demonstrating compliance with a general or specific license to showing that any violations that may have been committed were inadvertent and do not warrant criminal prosecution, we will execute a custom-tailored defense based on the circumstances at hand. If necessary, we will also work to establish a positive working relationship with OFAC going forward.
What Does an OFAC Compliance Program Include?
As is the case with any compliance program, the policies and procedures set out in an OFAC compliance program should be custom-tailored to a business’s unique risks. However, the U.S Treasury provides general guidance on what an OFAC sanctions compliance program (SCP) should contain.
Management Commitment
According to OFAC, “senior management’s commitment to, and support of, an organization’s risk-based SCP is one of the most important factors in determining its success.” In this vein, the OFAC attorney expects to see that management takes the company’s compliance obligations seriously, for example, by ensuring that the compliance team is afforded adequate resources and support. Depending on the size of the organization and its compliance responsibilities, this may entail naming a dedicated OFAC compliance officer. Regardless, it is imperative that management create a “culture of compliance” throughout the organization. This includes creating a means for employees to report potential violations and creating policies and procedures to address potential violations.
Risk Assessment
Any organization subject to OFAC oversight must conduct a “holistic review of the organization from top-to-bottom and assess its touchpoints to the outside world” to assess the business’ current and ongoing compliance risks. When assessing a company’s compliance risks, it is imperative that management does not only look at the current legal framework but also continually re-assesses the potential risks as these regulations frequently change. OFAC expects organizations to not only identify risks but also seek to better understand the root cause of the risks.
Internal Controls – OFAC Compliance Program
An OFAC compliance program should also contain detailed, easy-to-understand internal controls intended to provide employees with the information they need to avoid any possible violations. These internal controls should be disseminated among all employees, and management should take significant efforts to ensure all employees understand their compliance obligations. Essentially, internal controls should provide a way for an organization to detect and address all potential violations.
Testing and Auditing
Once a compliance program is established, an organization should undergo periodic testing and auditing to ensure that its SCP continues to comply with the changing landscape. This provides businesses with a better understanding of potential weaknesses in their current program and gives them the opportunity to address them. Audits and tests can be conducted internally or externally; however, it is crucial that the party conducting the audit or test remains objective and has the authority and confidence to issue suggestions.
Training
A compliance program is only effective if the company’s employees understand their compliance obligations. Thus, training is an essential element of any OFAC sanctions compliance program. A training program is not a one-time event, and organizations should arrange for periodic, job-specific training that indicates management’s commitment to remaining in compliance.
The Importance of a Compliance Program
An OFAC compliance program accomplishes several things. As with any compliance protocol, an OFAC compliance program helps management ensure that the organization remains compliant with all changing laws and regulations. Of course, it is imperative that all employees, managers and other stakeholders fully adopt the compliance program to effectively avoid violations.
However, given the ever-changing nature of businesses’ compliance obligations, occasional and inadvertent violations are not uncommon. And being found in violation of an OFAC sanction can bring a business to a grinding halt. An OFAC enforcement action can result in civil or criminal liability. The seriousness of the violation depends significantly on the nature of the conduct giving rise to the violation. For example, a violation of the Trading with the Enemy Act carried a civil penalty of $91,816 per violation, while violating the Foreign Narcotics Kingpin Designation Act brings a civil penalty of $1.5 million per violation. Further, each prohibited transaction or act typically constitutes a violation, meaning it is common for the subject of an OFAC investigation to face dozens of possible violations based on a single course of conduct.
The second reason why an OFAC compliance program is so important is that having a comprehensive OFAC compliance program in effect can result in a more favorable outcome in the event of an OFAC investigation. According to the U.S. Treasury, “OFAC will consider favorably subject persons that had effective SCPs at the time of an apparent violation.” More specifically, OFAC may “consider the existence, nature, and adequacy of an SCP” when determining whether to find an organization in violation of an OFAC sanction. Thus, an OFAC compliance program not only helps companies avoid inadvertent misconduct but also positions them more favorably in the event of an alleged violation.
Why Look to Oberheiden, P.C. for Assistance with OFAC Compliance, Sanctions Defense and Investigations
When you are looking for an OFAC lawyer or economic sanctions attorney, it is important you select a law firm with specific experience handling all aspects of OFAC compliance matters and investigations. This is a uniquely complex area of law, and not all attorneys have the knowledge, experience or dedication necessary to ensure a favorable outcome.
At Oberheiden, P.C., we regularly represent individuals and businesses in a wide range of OFAC-related matters. Regardless of the issues you or your business faces, the nationally respected OFAC lawyers at Oberheiden, P.C. are here to help.
Frequently Asked Questions:
I just received an OFAC administrative subpoena, what does this mean?
OFAC is one of the few federal entities that can issues administrative subpoenas. An administrative subpoena is similar to a traditional subpoena with one major exception—there is no judicial oversight required. Thus, OFAC lawyer is able to use its judgment when sending out subpoenas. While a judge does not need to sign off on an administrative subpoena, you can still be found in contempt for failing to comply. However, if you have a comprehensive OFAC compliance program on the books, it may help you avoid being found in violation. If you recently received an OFAC administrative subpoena, it is important that you reach out to the OFAC investigation and defense OFAC attorneys at Oberheiden, P.C. as soon as possible to begin working on a defense.
If I’ve already been contacted by OFAC, is it too late to devise a compliance program?
Yes and no. Because OFAC has already reached out to you to begin an investigation, one of the major benefits of a compliance program becomes irrelevant because it won’t help you avoid a potential violation in the first place. However, developing a later-than-ideal compliance program can still help the outcome of the investigation. Although it may seem counterintuitive, OFAC attorney considers the development of a compliance program as an indication that you take the regulations seriously—not as an admission of liability. Additionally, there may be other important steps to take to mitigate being found in violation. Thus, regardless of whether your business has a compliance program on the books, it is important to reach out to an OFAC compliance lawyer at Oberheiden, P.C. as soon as you realize you are the subject of an investigation.
Who Does OFAC Regulate?
OFAC’s mandate is to implement and enforce sanctions against foreign threats to the United States. While OFAC can impose sanctions against another country, group or person in a foreign country, because it is a U.S entity, it cannot “regulate” these parties. Instead, OFAC regulated U.S. citizens and business, as well as those physically present in the United States, by limiting their ability to conduct business with or otherwise support sanctioned parties. Thus, OFAC attorney can only bring official actions against the following parties:
- U.S. permanent residents;
- Any entity organized under U.S. laws;
- Any entity or individual located on U.S. soil;
- Foreign entities owned or operated by U.S. citizens.
If you or your business has been contacted by OFAC, reach out to the dedicated OFAC compliance attorney at Oberheiden, P.C. for immediate assistance.
How common are OFAC investigations?
OFAC investigations are becoming increasingly common. As more and more U.S. entities are doing business internationally, OFAC is ramping up its efforts to enforce compliance with its various economic sanctions programs.
What are the consequences of violating an OFAC economic sanction?
The consequences of violating an OFAC economic sanction depend on the circumstances involved. Consequences can range from the assets involved in the transaction being blocked (requiring a substantial undertaking to get them released by OFAC) to facing civil penalties or criminal prosecution under the IEEPA.
How can companies and financial institutions defend against alleged OFAC economic sanction violations?
Defending against alleged OFAC economic sanction violations requires an informed, proactive, and strategic approach. As a result, any company or financial institution that is facing enforcement by OFAC should engage experienced defense counsel as soon as possible.
How do I determine if my financial institution or business has violated one of OFAC’s economic sanctions?
Determining whether your company or financial institution has violated one of OFAC’s economic sanctions requires an internal compliance assessment. At Oberheiden P.C., in addition to helping clients establish and maintain OFAC compliance, we also conduct OFAC compliance assessments and represent clients in all matters involving OFAC.
When is it necessary to hire an economic sanctions defense lawyer?
If you have been contacted by OFAC or are concerned that your financial institution or company may have violated one of OFAC’s sanctions—even inadvertently—you should engage an economic sanctions defense lawyer promptly. In this scenario, executing a strategic defense and engaging with OFAC proactively can help to stave off unnecessary scrutiny and mitigate any risks flowing from the violation.
Contact the Economic Sanctions Lawyers at Oberheiden, P.C. Today
If your business engages with any customers, clients, suppliers, or retailers overseas, it is imperative that you develop a comprehensive and robust OFAC sanctions compliance program to mitigate the risks your company faces. At Oberheiden, P.C., our veteran team of OFAC compliance & defense attorneys are highly experienced in working with companies across all industries to create effective compliance programs. Several of our senior OFAC attorneys formerly worked for the federal government, investigating OFAC violations. This provides us with unique insight into these complex regulations and what the federal government expects from your business. To learn more, and to schedule a free OFAC lawyer consultation, call Oberheiden, P.C., at 888-680-1745. You can also reach us through our online contact form.
Additional Pages About OFAC
- OFAC Administrative Subpoenas
- OFAC Appeals Attorneys
- Blocked Transactions: What Banks and Businesses Need to Know About OFAC Compliance
- OFAC Compliance Checklist
- OFAC Clearance
- Five Keys to Creating an OFAC Compliance Policy
- OFAC Enforcement Actions
- OFAC Enforcement Guidelines
- Filing an Interpretive Guidance Request with OFAC
- OFAC – Internal Investigations and Case Reviews
- OFAC Investigations Defense
- OFAC Licensing
- OFAC and AML: What You Need to Know
- OFAC & FINRA – What You Need to Know
- Removal from the Specially Designated Nationals List (SDN List)
- OFAC Requirements
- How to Conduct an OFAC Risk Assessment & Review
- OFAC Sanctions Lawyer
- Ten Keys to Selecting an OFAC Sanctions Attorney
- Ten OFAC Compliance Strategies
- OFAC Counsel – Unblocking Frozen Funds or Assets
- OFAC Violations, Penalties, and Fines
- OFAC Voluntary Self-Disclosures
- Who Must Comply With OFAC?
