What Is An OFAC Screening and Its 5 Essential Components?

OFAC Screening
2 mn read

A subset of denied party screening, OFAC screening stands for The Office of Foreign Assets Control screening, applies on entities that engage in transactions using US Dollars anywhere inside or outside the country. OFAC compliance also recognizes sanctions and embargoes on countries or political jurisdictions. Therefore, OFAC screening is pivotal to compliance needs for a business.

As daunting it may sounds, but any organization that is based in the US and conducts business here requires OFAC screening for its financial transactions. Not to forget, any organization conducting business using US Dollars will require becoming OFAC compliant. Basically, OFAC screening applies to an individual whereas OFAC sanctions apply to a government or a country.

There are 5 essential components of sanctions compliance program (SCP) for a framework that takes a risk-based approach. The components include:

  1. Effective senior management or leadership commitment for review and approval of SCP, allocation of resources for compliance measures, promote culture of compliance, recognize failures in compliance and identify root causes and implement systemic solutions.
  2. Risk assessment exercise in a top-to-bottom approach for identifying risks across different stakeholders, perform due diligence at different points such as M&As etc. and develop risk assessment methodology.
  3. Internal Control Programs (ICP) to outline policies and procedures for OFAC compliance, clear communications, integration of SCP policies and procedures, deploy technology solutions, etc.
  4. Testing and auditing for assessing program performance, recalibrate risk assessments and fulfill measures of compliance, identifying root causes and addressing them immediately for future prevention of failures.
  5. Adequate training program for employees to understand core compliance responsibilities, accountability, risk assessment and profiling, and corrective actions.

OFAC has noted down several failures of compliance due to misinterpretations, improper due diligence, watch list screening software limitations, employee misconduct and inconsistent application of SCPs.

Observing the details of OFAC screening doesn’t confine to regulations only. In fact, various organizations have delusional training ethics and that leads them to troublesome situations. As a responsible organization dealing in the US or US Dollars, you ought to take effective steps of implementation for the SCP.

Cutting-edge Technology for Compliance Needs

The revolutionary technologies have benefited organizations in reducing compliance risks through high-end solutions. If you have watch list screening software with equipped features to scan through stakeholders and updated compliance information, you are highly ready to prevent any violations or inviting penalties for the same.

The modern-day exporter has ample responsibilities on check, including due diligence to avoid impending risks on an international level, especially for the reputation and business. Indeed, a software solution like export screening minimalizes those risks to a miniscule level and adds an empowering feature to the future processes.

What should you do as a business organization?

Even if you are described in any of the types highlighted above for a US business organization, you don’t have a fire escape to the regulations. We recommend you consult an expert in these matters, followed by an ICP to prevent compliance failures and penalties as an evident outcome.

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