Check your business partners against the OFAC list
By checking the OFAC list, you can protect from working local and foreign financial institutions subject to sanctions. This list from Office of Foreign Assets Control (OFAC) is designed to help companies fight terrorism—Nexis Diligence makes checking the OFAC list an easy process.
Fight terrorism: Check the OFAC list
Companies that check sanctions lists aren’t just fulfilling their legal obligations – they’re also avoiding risks to their business and safeguarding their public image. The longer-term aim of sanctions programs is to combat terrorist activities worldwide. European companies should also take note of US sanction lists, as well as EU lists. For example: including the United States’ OFAC list is vital to ensuring maximum safety and security.
What is a sanctions list?
A sanctions list is a publicly accessible directory of companies, local and foreign financial institutions, organizations, or individuals upon whom economic and/or legal restrictions have been imposed. It is prohibited to do business with companies, financial institutions, organizations, or individuals under sanction. The purpose of sanctions lists is to combat international terrorism by depriving individuals, organizations and institutions associated with terrorist activity of funds and economic resources. Economic resources include services, goods, rental arrangements, and the transfer of property or technology.
Why do sanctions lists have to be checked?
A sanctions list check is required to perform business transactions in a legally compliant manner. Failure to carry out these checks may have legal consequences. If sanctions lists are ignored and sanctioned persons, companies, or organizations go on to receive financial or economic resources, this can lead to heavy fines or even imprisonment.
The managers of a company are the primary subjects of such fines or sentencing in the event of a transgression; in some cases, the people responsible for exports will be held responsible.
There are also economic and financial risks to your company in the event of non-compliance, meaning that sanction list checks are also part of effective risk management.
What is the OFAC list?
The OFAC Sanctions List is a type of sanctions list: released by the Office of Foreign Assets Control (OFAC). The Office of Foreign Assets Control is a supervisory authority of the United States Department of the Treasury, which administers and enforces economic trade sanctions against states, organizations and individuals. These sanctions are based on current US foreign policy and national security objectives. The OFAC list safeguards international trade, both within the US and abroad from terrorist acts and illegal trading in arms and drugs.
Sanctioned persons, companies, or organizations are described by OFAC as Specially Designated Nationals (SDNs). The assets of Specially Designated Nationals are frozen and doing business with these blocked persons is also prohibited. The current Specially Designated Nationals list can be accessed via the OFAC website.
Perform due diligence: Who is obliged to check sanctions lists?
Every company, regardless of its size or industry, is obliged to make reasonable efforts to prevent terrorism. In line with these obligations, every company must carry out due diligence checks on its business partners. This applies not just to new business relationships (onboarding due diligence), but also long-standing business relationships (ongoing due diligence).
When Do Sanctions Lists Have to be Checked?
Your company is obliged to check sanctions lists when entering into a new business relationship. However, it is also essential to review existing business relationships on an ongoing basis to ensure that no financial or economic resources end up in the hands of sanctioned persons. There are also OFAC sanctioned countries, which companies should note if working with foreign financial institutions.
Regardless of whether you find something during the check, it is important to keep a record of your due diligence checks to show that you have fulfilled your due diligence obligations.
How often do sanctions lists have to be checked?
A general principle applies: in both economic and technical terms, reasonable effort must be made to prevent sanctioned companies, financial institutions, organizations, or individuals from obtaining financial or economic resources.
On an ongoing basis, it’s important that you check:
- Sanctions lists
- Sanctions programs
- Specially Designated Nationals list
- Consolidated sanctions
- Sectoral sanctions.
As these are regularly updated, the ideal solution would be for sanctions lists checks to run automatically in the background of your ERP or CRM system. This ensures full checks are carried out to minimize your risks.
Protecting Companies
For true compliance, it is important to raise awareness of sanctions lists among all employees. OFAC underlines this aspect in its Framework for OFAC Compliance Commitments—setting out five key components that every compliance program should meet.
- Management commitment, to supporting a risk-based compliance program and exemplifying correct behavior from the top-down. Appointing an OFAC sanctions officer is recommended.
- Third-party inspections must be carried out at regular intervals, assessing customers, suppliers, products, services and geographical locations for potential risks. This can also identify any weaknesses in compliance, as well as highlighting solutions.
- Internal compliance requirements, guidelines and checks: to set out appropriate procedures and to minimize risk.
- Training employees – and, where appropriate, customers and suppliers – ensures proper understanding of the risks of disregarding sanctions lists for all involved.
How often do sanctions lists have to be checked?
A general principle applies: in both economic and technical terms, reasonable effort must be made to prevent sanctioned companies, financial institutions, organizations, or individuals from obtaining financial or economic resources.
On an ongoing basis, it’s important that you check:
- Sanctions lists
- Sanctions programs
- Specially Designated Nationals list
- Consolidated sanctions
- Sectoral sanctions.
As these are regularly updated, the ideal solution would be for sanctions lists checks to run automatically in the background of your ERP or CRM system. This ensures full checks are carried out to minimize your risks.
How can sanctions lists be checked?
There are no legal stipulations regarding how you should check sanctions lists. Many companies, however, require a way of checking that is thorough and cost-effective: without disrupting day-to-day business. The high number of sanctions lists to be checked means that manual checks would be complex and time-consuming. It makes sense to find an automated solution to perform these compulsory checks.
BatchNameCheck offers the ability to batch check names against lists, allowing you to meet your due diligence obligations both when entering into new business relationships and on an ongoing basis . BatchNameCheck automatically generates daily results reports for checks run against lists of people and companies you work with or intend to work with. This enables you to identify risky business partners and comply with national and international compliance legislation and guidelines. Automated checking of sanctions lists protects your company and minimizes compliance risks. When onboarding or ongoing due diligence screenings reveal individual negative hits, these can be examined more closely using the Nexis Diligence® online tool as part of your enhanced due diligence processes.
This article is provided solely for information purposes. LexisNexis makes no guarantees as to its completeness or accuracy.
Frequently Asked Questions
Answers to some popular questions
What are the OFAC sanctioned countries?
It is dependant on the country you belong to and the sanctions list applicable to you. You can check that on our solution specifically designed to run a sanctions check for you. Click here to know more.
What is the purpose of OFAC sanctions?
The OFAC sanctions list is important to avoid working with entities and people who are non-compliant. Companies are also avoiding risks to their business and safeguarding their public image. The longer-term aim is to combat terrorist activities worldwide.
Get in touch
E-mail: marketingbis.asia@lexisnexis.com
Telephone number: +65 6349-0110