Avoiding the OFAC
AVOIDING THE OFAC
The Office of Foreign Assets Control, and How it Affects Your Nonprofit
Many nonprofit organizations have heard rumors about the “OFAC” and how one slight infringement of its rules can bring jail time or millions in fines. While the OFAC, or Office of Foreign Assets Control, is certainly not to be taken lightly, however, with a little knowledge and forethought most nonprofits should not have difficulty avoiding OFAC violations. In fact, the vast majority of nonprofits will never have cause to worry about the OFAC, simply because they are not involved in the types of situations with which the OFAC is concerned.
What is the OFAC?
The OFAC, or Office of Foreign Assets Control, is a division of the U.S. Department of the Treasury that focuses on prohibiting U.S. business and individuals from dealing with certain countries and groups currently under economic sanctions. Primarily, the OFAC exists to prevent any U.S. aid from reaching hostile foreign countries, terrorist groups, and those dealing in illegal drugs.
Thus, as long as your nonprofit does not deal with groups under OFAC sanctions, it will not be in violation of OFAC regulations. That said, you need to be entirely certain on this point, as the penalties for violations of OFAC regulations include fines up to $20 million and up to 30 years in prison.
If there is any question whether your nonprofit may have dealt with such groups, is currently involved with them, or might deal with them in the future, we highly recommend that you seek the advice of a lawyer experienced in this area of the law. This article gives no guarantee whatsoever as to the state of your nonprofit with regard to OFAC regulations. While we seek to provide the most accurate and up-to-date information, an article such as this is never a substitute for legal advice, nor is it intended to be legal advice.
How can your nonprofit avoid violating OFAC regulations?
The first thing your nonprofit can do to avoid violating OFAC regulations is to consider the foreign countries in which it works. Currently, the OFAC has imposed comprehensive sanctions on Burma (Myanmar), Cuba, Iran, Sudan, and Syria. Their non-comprehensive programs include the West Balkans, Belarus, Cote d’Ivoire, Democratic Republic of the Congo, Iraq, Liberia (Former Regime of Charles Taylor), Persons Undermining the Sovereignty of Lebanon or its Democratic Processes and Institutions, Libya, North Korea, Somalia, and Zimbabwe, as well as others. Note, however, that these non-comprehensive programs are, as a general rule, directed only toward specific individuals and entities within those countries.
If you are concerned about your nonprofit’s activities, there are several methods by which you can determine whether those activities are permitted or not. First, you can find information on specific countries or topics such as “Libya sanctions” or “rough diamond trade controls” at the following OFAC webpage: http://www.treasury.gov/resource-center/sanctions/
Additionally, you can search the OFAC’s online database of those to whom regulations apply (referred to by the OFAC as “Specially Designated Nationals,” or SDNs). Both a searchable database and a pdf list of SDNs is available at: http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx. Moreover, this webpage also contains a link through which you can sign up to receive updates whenever the OFAC changes their list of SDNs and applicable regulations.
If you believe you may have found a match between your nonprofit’s dealings and a regulated SDN, the following webpage provides specific steps whereby you can determine if a match in fact exists: http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/answer.aspx#1. Scroll down to question 5 – “how do I determine if I have a valid OFAC match?” – and follow the steps given there.
If you find that a proposed nonprofit activity is in fact prohibited by the OFAC, you can apply for a license to conduct this activity despite the applicable OFAC regulations. Information on OFAC licenses is available at the following webpage, beginning at Question 74: http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/answer.aspx#1.
Finally, in addition to determining whether any present or planned nonprofit activities violate OFAC regulations, nonprofits involved with questionable countries or groups should take steps to develop a plan for ensuring their compliance with the OFAC. This is especially important because should your nonprofit unwittingly violate OFAC regulations, the OFAC will conduct a thorough examination of your OFAC compliance program. While the OFAC is generally quite strict, it may choose to be more lenient on a nonprofit that has a highly developed OFAC compliance program in place.
What can you do if your nonprofit has already violated OFAC regulations?
Unfortunately, the OFAC has not developed an “amnesty” program. That said, however, companies and individuals are encouraged to voluntarily disclose past violations of OFAC regulations, and doing so is considered a mitigating factor in Civil Penalty proceedings. While the OFAC does not grant amnesty for unwitting violations, it does review the totality of the circumstances surrounding any violation. Moreover, as discussed above, the use of a thorough OFAC compliance program will be a significant factor in the OFAC’s investigation.
Self-disclosure should be made in the form of a detailed letter, along with any supporting documentation. This letter should be mailed to Adam Szubin, Director, Office of Foreign Assets Control, U.S. Department of the Treasury, 1500 Pennsylvania Ave., N.W., Washington, DC 20220.