Often times when clients are gauging whether or not to report an apparent violation of a U.S. economic sanction program they ask themselves the question: “How will OFAC ever find out?” This is a question that we have heard over and over again, so I thought it may make sense to go over some of the common ways that an OFAC investigations are triggered:
1. Reports of Blocked or Rejected Property: The most common way that OFAC will find out about a potential violation is through a blocked or reject report. These reports are generated by U.S. depository institutions which have blocked or rejected a transaction based on a suspected sanctions violation. These reports are sent to OFAC within ten days of the U.S. depository institutions actions and provide information about the parties involved in the blocked or rejected transactions. OFAC receives thousands of these reports every year.
2. Voluntary Self-Disclosures: Naturally, the self-disclosure of an apparent violation to OFAC could lead to a follow-up investigation to the circumstances surrounding that disclosure. While seeming to subject yourself to an investigation may seem like a bad idea, there are great benefits to submitting a voluntary self-disclosure including receiving a 50% reduction in your base penalty.
3. Referrals from other U.S. Government Offices: OFAC will follow up on information it receives from other U.S. agencies investigating other types of violations. This is often the case when a law enforcement agency catches a hawala broker who has been involved in transferring funds between the U.S. and an embargoed country.
4. Referrals from Foreign Agencies: Much in the same manner as U.S. government agencies share information with OFAC, so do foreign agencies. Investigations of individuals and entities being conducted by overseas law enforcement agencies which reveal evidence of violations of U.S. law to OFAC.
5. Ongoing/Existing Cases: OFAC also initiates investigations into apparent sanctions violations based on information it obtains through other investigations. As such, if some party engaged in prohibited transactions engaged with other U.S. persons, the investigation into the other party’s activities could implicate all of those parties involved in the transaction.
6. Confidential Informants: A number of investigations are also initiated by tips from confidential informants. These can come in the form of a written submission or even a call to OFAC’s enforcement division.
7. Publicly Available Information: Open source information, such as those contained in corporate registries of embargoed countries, or found on the internet through news articles and press releases can be used as the basis of the initiation of an OFAC investigation.
The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or firstname.lastname@example.org.