When a violation of a sanctions program administered by the United States Department of the Treasury Office of Foreign Assets Control (OFAC) has taken place, it is generally advisable to self disclose this violation or potential violation to OFAC. The reasons for this are varied, however, the simple answer is that a voluntary self disclosure could greatly reduce any penalty you receive for that violation. Below I outline three steps that I have taken which have greatly assisted my clients in their OFAC voluntary self disclosure matters.
1. Make Sure You Have a Potential Violation. Prior to filing anything, make sure the transaction was indeed a violation. Make sure to check the exemptions found in any relevant statutory authority (IEEPA, CISADA, etc.), the general licenses found in the regulations, and any interpretative guidance found on OFAC’s website. If you are unsure that a violation has occurred, but suspect that it has, then it may be wise to disclose the matter to OFAC.
2. Act Quickly. If OFAC finds out about the violation prior to you submitting a voluntary self disclosure, then your self disclosure is pretty much useless. As such, once you have enough information about the violation then you should file an initial self disclosure. Inform OFAC that you will supplement your voluntary self disclosure as more information becomes available. This is done because you may not have all information pertaining to the violation readily available, however, you the best course of action is to report the violation as soon as you become aware of it.
3. Advocate When Necessary. If you are unsure as to whether or not the disclosed activity is a violation or not, tell OFAC what leads you to believe it is not. Don’t just make general statements. Rather, support your position with relevant regulations, laws, guidance, or case law. Also, look to OFAC’s Enforcement Guidelines to determine what factors they may consider in reviewing your case during the pre-penalty phase. Follow those enforcement guidelines to provide OFAC your stated position on how those criteria are impacted by the transactions disclosed in your voluntary self disclosure.
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.