STOP! Paying that $100 Invoice Could Cost your Organization $100s in Fines!

Transcription

1 STOP! Paying that $100 Invoice Could Cost your Organization $100s in Fines! Pam Miller Senior Trainer :: IOFM

2 What is OFAC? Oregon Freight Advisory Committee? NO Olmstead Falls Airport Committee? NO Office of Financial Accounting Control? NO Ontario Farm Animal Council? NO Ohio Financial Accountability Certification? NO Office of Foreign Assets Control? YES! 2

3 Agency of the US Treasury Its mission: administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction 3

4 So What Does It Do? It maintains lists of individuals & entities involved in the proscribed activities In order to prevent transfers of funds to them It can impose controls/restrictions on transactions And it can freeze assets under US jurisdiction Transactions made by US persons Virtually all transactions made in USD And it can levy fines against payors big fines 4

5 Lists SDN (Specially Designated Nationals) list Individuals & companies owned or acting on behalf of targeted countries Non-country specific individuals & entities, too Drug traffickers and terrorists FTO (Foreign Terrorist Organizations) list Rolled into the SDN list Secretary of State lists organizations for 2 years, then re-assesses 5

6 The Lists Serve to Support US efforts to curb terrorism financing and encourage other nations to do the same. Heighten the public s awareness and knowledge of terrorist organizations. Stigmatize and isolate designated terrorist organizations internationally. 6

7 US Persons May not acquire goods or services from those on the list May not make payments to those on the list Period! 7

8 Who is a US Person? Varies a bit by sanction type but at a minimum: US citizen Permanent resident alien Entity organized under US laws (including foreign branches) Any individual or entity in the US Foreign entities that operate in the US or partially in the US 8

9 OFAC Doesn t Act Alone Many sanctions are based on those imposed by the UN and other countries lists such as: Canadian OSFI list UN Consolidated list EU Consolidated list UK list Australian DFAT list CH SEKO (Europe) World Bank List of Debarred Parties 9

10 This is Serious Business The US is a bit more serious about this than many other countries Many of them strongly encourage compliance The US uses civil & criminal penalties to enforce compliance Yeah, including jail time 10

11 And you Thought Government Agencies are Inefficient 2009 Congress increased maximum fine cap from $11,000 to $250,000 per violation or twice the value of the underlying transaction 2011 OFAC collected $91,650, OFAC collected $1.1 billion 2013 OFAC collected $137 million 2014 OFAC collected$1,207,067,713 January through November 2015 = $599,705,997 11

12 Real Money that Real Organizations have AGREED to Pay in Fines PayPal: $7.7 million for 486 sanctions violations that totaled $43,934 Commerzbank AG: $1.45 billion in criminal and civil penalties Bank of America: $16.5 million for 208 transactions that totaled $91,192 plus failure to block 5 accounts owned by 10 persons on the SDN list 12

13 \_( ツ )_/ Yes, these are all financial institutions While heavy focus is on financial institutions, no organization is exempted from compliance ESCO Corp, maker of steel casings: $2 million Schlumberger Oilfield Holdings: $232.7 million Schlumberger is not a US person but their Drilling & Measurements (D&M) unit is Texas based 13

14 Are you Checking Vendors to See if They are Okay to Pay? Many organizations are not Because they never heard of OFAC Because they don t think it applies We only use US based vendors We don t export or import Because they just don t know how where to begin BTW this is not new OFAC created in

15 Don t Rely on the Name or Address Some names sound perfectly innocent And some vendors have US addresses Like Shelimar Real Estate Holdings II, Inc. of Miami, FL Or Masters International Inc. of Lakeland, FL Or Running Brook LLC of Miami, FL Of course, then there is Altaf Khanani Money Laundering Organization 15

16 Where to Begin If you are a US organization paying US vendors only the likelihood that you are paying someone on the list may be low, but From now on, check the list before entering a new vendor into the system Better yet, involve purchasing the list should be checked prior to entering into an agreement to acquire goods or services Add this step to your VMF policies & procedures 16

17 There are Two Ways to Check the List Download the list.pdf or text formats As of 1/28/16 there were 944 pages in the.pdf format of the list 3 columns per page 17

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19 Or Use the Handy Search Box 19

20 For the RSS feed Or updates And Sign Up! 20

21 In Addition Come up with a plan for comparing existing vendors to the list Organizations that have a plan in place fare better Instead of a $ settlement they may receive a Finding of Violation Enshrine OFAC compliance in your policies & procedures! 21

22 Use a Risk Based Approach Do you pay non-us vendors? Start with them FATCA reviews may uncover previously unknown foreign payees/recipients Incorporate OFAC catch up into vendor clean up project While it may make sense to start with largest vendors first, big well-known corporations are unlikely to be on the list Start with mid-sized vendors that are frequently paid Don t skip donations and charities 22

23 Additional Thoughts Consider implementing an OFAC review as vendors appear on payment runs Yes, it takes time but this method focuses effort on vendors that are truly active Flag vendors in the system that have been checked and are okay But you must re-review periodically Things change That s why you sign up for updates 23

24 False Positives/Hit Lists Misspellings, mistranslations, name similarities, etc. Find a match, carefully review, discover your vendor is okay, make a note to avoid in depth research in the future But that s not the end of it The BMO Harris Bank violation was in regard to their false hit list Caused OFAC to issue new rules In essence, require that these lists be reviewed regularly just to be sure 24

25 Beyond OFAC Global organizations or those that trade internationally have additional lists to check These checks must be incorporated into procedures, too And, of course, there is quite a bit of variation in how various countries and the UN compose their lists And the lists keep growing Enforcement is being stepped up globally Ensuring compliance is a complex challenge 25

26 The Three Biggest Lists OFAC, the UK Department of Treasury, & the EU Find the UK list at: nancial-sanctions-consolidated-list-oftargets/consolidated-list-of-targets It can be downloaded in multiple formats And additional information is also available at the link 26

27 Find the EU list at: European Union You can also subscribe to an RSS feed of updates General information regarding EU sanctions can be found at: 27

28 Linky Party Find the UN consolidated list at: un-sc-consolidated-list Find the Canada OSFI list at: 28

29 Linky Party, continued Find the Australian DFAT list at: Find the World Bank list at: hesitepk=84266&contentmdk= &me nupk=116730&pagepk= &pipk=

30 Help is Available 3 rd parties have developed offerings that include checking vendors against OFAC and other lists Those offering SIM (Supplier Information Management) apps in particular And there are compliance apps How do they work? What lists do they check? Are they configurable? And many banks that outsource payment processing also check OFAC & other lists 30

31 Before you Sign on the Dotted Line Understand how they perform the checks Understand how the information will be delivered to your organization Implement controls & manage the relationship Use of a 3 rd party doesn t shift liability to them it still belongs to your organization Is there recourse or a penalty provision in the contract? They should have a nickel in it! 31

32 Just One More Way That AP adds value to the organization Solid compliance with sanctions requirements Saves money in terms of less exposure to risk of fines & possible other civil & criminal penalties Protects the organization from bad publicity And it is the right thing to do! 32

33 Questions? 33