OFAC (Office of Foreign Asset Control) is the part of the Department of Treasury that administers and enforces economic sanctions imposed by the U.S. against various countries and individuals. OFAC supervises an array of sanctions programs, which fall into one of two basic categories:

1. Comprehensive sanctions programs that broadly forbid transactions with all individuals and companies in specific countries: Russia, Cuba, Iran, Myanmar, Sudan and Syria.
2. Non-comprehensive programs that forbid transactions with specifically named individuals and entities who are in certain countries (such as North Korea or the Ivory Coast) or who are engaged in terrorism, proliferation of weapons of mass destruction or international narcotics trafficking. These individuals and entities are included in a list maintained by OFAC that is formally known as the Specially Designated Nationals and Blocked Persons, or the SDN List.

The various sanctions programs are authorized by two main federal statutes either the Trading with the Enemy Act (TWEA) or the International Emergency Economic Powers Act (IEEPA).

All U.S. citizens and permanent residents must comply with OFAC regulations, whether or not they currently reside in the U.S. OFAC sanctions programs also apply to all persons and businesses within the U.S., as well as to foreign branches of U.S. companies. The Cuba sanctions program also applies to foreign subsidiaries that are owned or controlled by U.S. companies.

Violations of OFAC sanctions programs

With certain exceptions, a U.S. company may not engage in financial transactions with, sell goods to, or provide services to any person or entity on the SDN List or to nationals of the countries that are the subjects of the comprehensive sanctions programs. This is the most common and obvious scenario that constitutes an OFAC violation.

However, there are other kinds of situations that can also potentially give rise to a violation of OFAC sanctions programs. Some of them include the following:

• A U.S. company acquires a European bank, some of whose customers are Cuban nationals, and now finds itself providing banking services in violation of the Cuba sanctions;
• A U.S. parent company provides back-office services for its overseas subsidiaries, which may engage in business with entities or persons on the SDN list;
• A financial institution makes a loan in support of a sale of goods that are shipped on a vessel affiliated with an shipping company that is a national of a country subject to comprehensive sanctions;
• Employees of a financial institution excise accurate information in order to disguise transactions involving a Syrian business;
• A food manufacturer sells its products to wholesalers knowing that the products will be resold to a prohibited country’s supermarkets.

The sanctions programs are complicated and many ramifications can be easily overlooked, even by businesses that fully intend to comply.

The criminal and civil penalties for violating the terms of an OFAC sanctions program can be very severe. Some OFAC sanctions violators have faced tens of millions of dollars in penalties. Even in smaller cases, the penalties may be several times the value of the prohibited transaction, since OFAC views its penalties as a deterrence, not a restitution.

Depending on the particular statute behind particular sanctions program, violators can face criminal penalties of as much as 20 years? imprisonment and a fine of $1 million. Asset forfeiture provisions may allow the government to claim property involved in the violation. Civil penalties can be as high as $250,000 per violation or an amount equal to twice the amount of the transaction that is the basis of the violation.

Norman Spencer Law Group PC provides guidance to U.S. and overseas businesses and individuals who wish to implement practices and protocols designed to minimize the chances of inadvertently violation OFAC sanctions programs. Our team of highly skilled and knowledgeable attorneys also provides consultation as to specific transactions that may trigger OFAC issues, as well as representation to those who have? been charged with OFAC violations.

To find out more about how Norman Spencer Law Group PC can help you navigate the complexities of OFAC, call us at (212) 577-6677.

We are located in New York City but we provide assistance to clients in federal and regulatory matters across the country and abroad.

FCPA compliance attorneys at Norman Spencer Law Group PC offer their help to Unites States and foreign organizations in developing, implementing and rigorously reviewing their FCPA compliance policies, and in advising their overseas branches, subsidiaries, representatives and agents regarding FCPA-compliant corporate procedures for handling contracts with foreign governments or involving their officials. Besides that, we represent clients investigated and prosecuted by the SEC (Securities and Exchange Commission), FBI and the Dept. of Justice for the Act’s infringement.

The Foreign Corrupt Practices Act regulates the way U.S. companies do business with foreign governments and their officials. It also covers cases of foreign companies implicated in corrupt payments in the U.S. According to this statute, the companies’ representatives must not bribe foreign officials to get profit. Besides that, the legislation makes it illegal to make or offer a bribe to a foreign public official using any kind of interstate communications (mail, electronic, wire). The Act also requires businesses whose securities are listed in the country to comply with certain accounting requirements.

Nowadays the federal government is increasingly aggressively pursuing FCPA violations, and reportedly at any point of time there are around 150 ongoing criminal investigations, a large percentage of which result in prosecutions and convictions.

The SEC has been known to target companies in such investigations by capital origin. Interestingly, China is among the countries viewed by the SEC as presenting a high risk of violations, due to a high level of government corruption. As a result, Chinese companies are one of the most frequently targeted by FCPA enforcement. Besides that, the agency also holds a list of industry domains that statistically are more commonly vulnerable to corruption. These include banking and finance, energy, transportation and some others.

Businesses and persons found guilty of this offense may face severe penalties – prison time, steep fines and forfeiture of property. It should be noted separately that criminal investigations into FCPA violations may uncover other offenses, such as mail and wire fraud, securities and investment related crimes, money laundering and others. Given that the agents may sometimes be overzealous when investigating into FCPA violations allegations, it is highly important to establish policies that will ensure compliance with the Act’s provisions.

Most countries have adopted similar anti-corruption legislation and cooperate with other countries’ governments when investigating into international bribery and corruption cases. Several international organizations help ensure anti-corruption enforcement:

• the Organization of Economic Cooperation and Development;
• the Asia Development Bank;
• the World Bank;
• the United Nations Convention Against Corruption;
• the European Union conventions.

The agreements and conventions signed by these organizations’ state-members provide for harsh criminal penalties, long statutes of limitations and other provisions that help anti-corruption enforcement.

The ultimate goal of FCPA attorneys at our NY firm is to prevent prosecution and criminal investigations through thorough preparation and compliance review. In situations where FCPA investigations have already started, our FCPA lawyers can prevent or minimize the client’s criminal and financial exposure by negotiating alternative methods of resolution.

For example, in a recent case we handled we managed to we managed to negotiate deferred prosecution. In fact, this is not an uncommon outcome in such prosecutions as the government attempts to encourage voluntary disclosure of information and cooperation with federal investigators. In these cases, the corporation may be taking the blame so that its executives avoid criminal charges.

Norman Spencer Law Group has highly competent FCPA attorneys on board who have wide experience building strong compliance programs, conducting internal audits and defending clients in investigations and prosecutions regarding FCPA-related and other white-collar offenses. We assist clients in the U.S. and across the globe in cross-border criminal and regulatory matters. Our FCPA attorneys’ expertise includes issues directly associated with compliance programs, as well as risk assessment, conducting internal investigations concerning potential violations, transaction counseling as to dealing with state-owned entities or other high-risk enterprises, and advice to buyers and sellers regarding FCPA compliance in mergers and acquisitions.

We fully realize the need for discretion involved in these matters, and offer tactful and sensitive solutions to compliance issues confronted by local and foreign companies. We encourage our clients to be proactive in forestalling any potential FCPA issues and assist them in implementing and crafting such measures as formal policy statements, company-wide ethics manuals, training programs and seminars, introducing mechanisms for coordinating/operating the compliance program (“clearinghouse”), maintaining accurate accounting and record-keeping systems, and setting up anonymous reporting procedures.

To obtain a thorough and extensive consultation concerning any FCPA issues your company may face, contact Norman Spencer Law Group PC at (212) 577-6677.