OFAC screening is part of doing business for U.S. companies who transact with international customers. The process ensures compliance with U.S. law and protects the interests of the company by avoiding fines and unintentional contact with blocked parties.
Despite its importance, there are few guidebooks on how to do comprehensive and efficient OFAC screening. Companies are largely left to themselves, to both search publicly available information and interpret how the law applies to them. Thankfully, there are some easy-to-implement strategies that improve OFAC screening procedures to reduce the risk to companies.
Tip 1: Know OFAC Compliance Involves Many Different Laws
Although the Know Your Customer guidelines are a relatively recent initiative, the U.S. government has put restrictions on trade and economic activity since the 1800s. OFAC compliance is in fact following U.S. Treasury laws that apply to many different countries, individuals and companies in order to support U.S. interests. OFAC barriers are in place to stop a range of activities, including terrorism, drug trafficking, money laundering and more. Because of the scope of these rules, it is wise not to assume that a new customer will not fall on the specially designated nationals (SDN) list and to always perform due diligence.
Tip 2: Get Informed of Updates
The SDN list is not a static, unchanging document. It is updated on a regular basis, so your new or existing customer may fall under its gambit without warning. It is a good idea to stay abreast of the latest version of the SDN so you can take appropriate action in case you are barred from doing business with a certain party. You can sign up to receive email updates from the U.S. Treasury and receive alerts when the list is revised.
Tip 3: Use an Automated OFAC Screening System
Many companies rely on a manual system to check for OFAC compliance. Unfortunately, this fails many companies who do not have the capacity to thoroughly ensure they are not doing business with blocked parties. Companies that operate with integrity and value transparency may find they inadvertently run afoul of U.S. Treasury law. To fully protect your company, it is best to use an automated system. Fortunately, you can adopt one that works seamlessly with your existing procedures.
Tip 4: Beware of False Positives
One drawback of manual, and some automatic, OFAC sanctions screening systems is the potential for false positives. Many of your valued customers could have a name similar to, or the same as, a party on the SDN list. In order to prevent a challenging situation where you refuse to do business with a legitimate customer, consider a system with a computerized algorithm that identifies false positives based on such misleading cues as initials and acronyms.
Tip 5: Run a Self-Audit
As a business owner who transacts with international parties, OFAC screening is your obligation. You may have to demonstrate your compliance. Keep accurate and detailed records of how your screening process works to fulfill your due diligence. Details about who you screened, when you screened them and the results of your screening should be kept on file.
OFAC sanction screening is required by U.S. law. Doing so efficiently and accurately helps your business by allowing you to grow your customer base without worry. By automating your screening practices and staying up-to-date with changes to the law, you can ensure compliance without unreasonable constraints on your time. Need help or want to know more about how to implement a sanctions screening? Lyons Commercial Data has solutions for you.