Economic Sanction Enforcement Guidelines

• Date: February 18, 2011
• Source: Admin

The Economic Sanction Enforcement Guideline is a publication of the U.S. Treasury Department’s Office of The Foreign Asset Control (“OFAC”). The OFAC uses these Guidelines to decide the enforcement for violations of U.S. economic sanction programs. In a nutshell these Guidelines elaborate on OFAC’s enforcement policy and procedures to enforce existing substantive rules.

Background

OFAC administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals.  The sanctions target foreign countries and regimes, terrorists, international narcotics traffickers, and those organizations, entities, and individuals engaged in activities that are considered threats to the national security, foreign policy or the economy of the United States. Economic sanctions are designed to deprive the target of the use of its assets and to deny it access to the U.S. financial system and the benefits of trade, transactions, and services in the U.S. markets. OFAC acts under Presidential national emergency powers, as well as specific legislation, to prohibit transactions and block (or ‘‘freeze’’) assets subject to U.S. jurisdiction. OFAC is responsible for civil investigation and enforcement of economic sanctions violations committed by Subject Persons, as defined in the Guidelines. Where appropriate, OFAC may coordinate its investigative and enforcement activities with federal, state, local and/or foreign regulators and/or law enforcement agencies. Active enforcement of these programs is a crucial element in preserving and advancing the national security, foreign policy and economic objectives that underlie these initiatives. Penalties, both civil and criminal, serve as a deterrent to conduct that undermines or prevents these sanctions programs from achieving their various goals.

The economic sanctions enforced by OFAC target transactions with any of the countries, organizations, entities and individuals that are governed by OFAC.  The economic sanctions include civil and criminal penalties.  Therefore, before entering into any international business transaction, it is important to verify that the parties to the transaction are not targets of OFAC's economic sanctions programs.

Flagrancy of Apparent Violations

While deciding the basic penalty amount to be levied for a violation, the OFAC considers two main criteria. The first being the “Egregiousness” of the apparent violations which is again based on the first four general factors listed in the Enforcement Guidelines with emphasis on the first two. The first four factors for determining the egregiousness of a case as per the Enforcement Guidelines are listed as under:

The second criteria used in the Enforcement Guidelines to determine the base civil penalty amount is the submission of a Voluntary Self-Disclosure (VSD) by the party involved prior to the time that OFAC, or any other federal, state or local government agency or official, discovers the apparent violation or another substantial similar apparent violation.

Sources

http://www.dlapiper.com/new-ofac-economic-sanctions-enforcement-guidelines/

http://www.sec.gov/about/offices/ocie/aml/enf_guide_09082008.pdf

http://bx.businessweek.com/international-trade/view?url=http%3A%2F%2Fimages.jw.com%2Fealert%2Finternational%2F2009%2F1113sm.html