The fight against terrorism financing, money laundering, and different financial crimes necessitated creating the Office of Financial Assets Control (OFAC).
This department is mandated with enforcing economic sanctions against individuals, entities, and countries involved in illegal financial activities.
As a business owner, is there a need for an OFAC search before conducting business? If you’re looking for the answer to this question, you’re in luck. Here’s a detailed guide highlighting different aspects of the OFAC search you need to know about if you’re in business.
- 1 What is the importance of OFAC Search?
- 2 Are All Business Required to Do an OFAC Sanctions List?
- 3 There are different types of sanctions lists, including:
- 4 When Should You Screen Your Potential Business Parties?
- 5 How Can You Best Conduct an OFAC Search?
- 6 Takeaway
What is the importance of OFAC Search?
Criminals and terrorists look to take advantage of innocent business owners to transact their ill-gotten money.
Therefore, it’s your responsibility as a business owner to make sure to conduct an OFAC search or else risk being considered an accomplice.
Some of the ways conducting an OFAC search will help your business include:
Helps You Better Identify Your Customers
In the banking, financial services, and other controlled industries, your mandate as the business owner is knowing your customers and understanding their needs.
With the OFAC search, you’re better placed to do this since you’ll be able to get more detailed information about your client.
Without it, the only information you would have about your client would be their signature’s handwriting, their face, voice, and social security number.
Ensure None of Your Employees are Involved in Illegal Activities
You must make sure that all your employees comply with the requirements set by OFAC.
This is important to ensure none of them is a narcotics trafficker, terrorist, or involved in any way in illegal activities.
To make sure this doesn’t happen, you should use Microbilt’s OFAC search tool to screen all your employees.
This way, you can be sure that nobody working in your company is mentioned on the OFAC SDNs list.
Avoid Becoming a Victim of Illegal Financial Dealings
When conducting business with an entity or individual, you should always perform an OFAC search.
This search provides you with much better security, unlike validating Social Security Numbers, due to either the concertation of funds or the client’s anonymity.
As a result, you increasingly become exposed to financial loss should you deal with a devious client.
Thanks to the OFAC search, all this is avoidable since you can identify deceitful sub-entities, straw buyers and aliased persons quickly.
Hope now the importance of OFAC search is clear to you.
Are All Business Required to Do an OFAC Sanctions List?
Yes, it’s mandatory to check the sanctions lists when in business to help fight against terrorism and drug-trafficking.
The Office of Foreign Assets Control releases this OFAC sanctions list placed on individuals, companies, and states. Making sure to check the OFAC list is essential since it’s usually based on the national security objectives and U.S. foreign policy.
Therefore, you should always do this check on all your business partners, regardless of whether they’re existing clients with who you have long-standing relations or new clients.
The sanction list check is necessary since it helps ensure that all the business truncations your company is involved in are legal.
Otherwise, you risk legal consequences should you benefit from any economic or financial resources.
The penalty for not following mandates is either imprisonment or paying hefty fines. Thus, it’s best to avoid such harsh penalties altogether by simply checking the sanctions list.
There are different types of sanctions lists, including:
- Specifically Designated Nationals (SDN) List: It’s a list comprising of companies and individuals acting on behalf or controlled by countries sanctioned by the United States.
- Consolidated Sanctions List: This list has every sanction detail that isn’t included in the SDN list.
- Foreign Sanctions Evaders List
- Sectoral Sanctions Identification List
If your company is involved in any financial transaction with an individual or company on the sanction list, you risk paying stiff fines and other penalties.
The government is stringent on this issue, as evident by fines worth more than $800 million being collected between 2015–2018.
In addition, jail time and other criminal convictions were also passed between this same period.
Therefore, it’s crucial as a business owner to protect yourself and your company by simply checking the sanctions list whenever you’re conducting business.
When Should You Screen Your Potential Business Parties?
It’s vital to know when you’re required to screen your potential clients to avoid any fines.
Ideally, it would be best if you always screened your prospective business partners the first time you engage in financial transactions.
It would help if you did the screening again when money changes hands after every order and keep repeating this process.
When you should conduct the screening is another important consideration you need to always have in mind.
This is to make sure that the screening happens in line with the company’s set objectives.
As a result, this ensures that the transfer of information, goods, technology, and finances doesn’t happen in conflict with the set regulations.
How Can You Best Conduct an OFAC Search?
Manually searching the OFAC sanctions list is time-consuming and causes a lot of administrative challenges to your business.
It also increases the chances of making an error and, as a result, you have to deal with fines.
Because of this, it’s always best to invest in an OFAC sanctions screening tool.
With this useful technology, you efficiently and quickly observe to set compliance standards set by regulators. You’re also at a lower risk of making an error that might lead to hefty penalties getting imposed on your business.
As a business owner, you must always observe the government’s compliance standards to uphold your company’s reputation and reduce risk.
One important compliance you’re required to watch is always perfuming the OFAC search. This search allows you to record your business partners, vendors, employees, and clients.
And should any of them engage in any illegal financial transaction, you’ll be able to terminate any dealings with them to avoid any penalties.
This is why, learning the importance of OFAC Search is a must for every business owners.
Therefore, it’s best to always do an OFAC search before conducting any business transaction. This way, you can be sure your company will carry out all its operations smoothly.