Corporations that have international clients have to comply with far more rules and regulations than companies that only operate domestically. Among those new laws are regulations from the U.S. Department of the Treasury’s Office of Foreign Assets Control, or OFAC. These rules prohibit doing business with countries, corporations, or individuals who are under economic sanctions from the United States.

These regulations can change rapidly, especially in times of political instability, and when federal government investigations occur, the penalties for violating them are severe. Building a good defense strategy is essential. One must get a proficient lawyer from a trusted law firm. Office of Foreign Assets Control (OFAC) defense lawyer and the founder of Oberheiden, P.C. Dr. Nick Oberheiden can help.

1. Stay Up-to-Date on International News

One of the best ways to avoid penalties for trading with sanctioned parties is to stay apprised of international developments. If a country or world leader does something that leads to blowback from the United States, OFAC sanctions can follow. Getting ahead of that process can help your company avoid legal liability from the agency.

However, international news reports are only able to cover the tip of the iceberg when it comes to foreign affairs. The OFAC’s list of sanctioned individuals is generally over 1,000 pages long and includes people, corporations, and other entities that you probably never heard about. Relying solely on a major newspaper, no matter how thorough or reputable the paper is, will only provide a false sense of security without taking additional steps.

2. Use Sanctions Screening Software

There are third-party programs and software available that can screen your company’s customers, transactions, and financial documents for hits on OFAC’s lists of sanctioned individuals and entities. Getting access to one of these programs can be a worthwhile investment, especially if your business does a lot of transactions abroad, particularly in parts of the world that are unstable or prone to U.S. criticism.

However, just getting the software and letting it run in the background is not always sufficient. If the software fails to update to the latest OFAC list, it can miss lots of prohibited customers and you would never know about it. Additionally, computer programs will not pick up on subtle attempts to get around their searches or algorithms. Sanctioned parties are known to use deceit to continue to gain access to U.S. markets. This can take the form of misspelling locations or parties in documents likely to be searched by these screening programs to continue moving forward with a business transaction.

3. Effective Compliance Strategies Can Mitigate Penalties

Adopting an OFAC compliance strategy is not just important because it can avoid violations and sanctions. It can also mitigate the penalties for a violation if one ends up happening despite the corporate compliance protocols.

According to guidelines released by OFAC, the “existence, nature, and adequacy” of a corporate compliance strategy is a factor that the agency will consider when imposing a civil monetary penalty for an OFAC violation. The presence of a corporate compliance protocol can also prevent the agency from labeling the violation as an “egregious” one, which calls for higher sanctions.

This means that an imperfect corporate compliance strategy that fails to prevent a violation can still be useful. However, it does not mean that a haphazardly constructed one will suffice. The OFAC takes into account the adequacy and effectiveness of the protocol when deciding whether to mitigate sanctions.

4. Make Sure to Avoid Known Types of Violations

The OFAC does, however, expect companies to stay up-to-date with their OFAC compliance measures. To help companies do this, the OFAC publishes its enforcement actions online, with the expectation that corporations that fall within the agency’s jurisdiction will read them and update their compliance measures accordingly. If your company fails to do this and violates an OFAC regulation in a way that the agency has enforced numerous times before, the OFAC will not give you the benefit of the doubt.

According to the agency, ten of the most common root causes of OFAC sanctions are:

1. Not having a formal OFAC compliance strategy, at all
2. Misinterpreting an OFAC regulation or wrongly presuming that it does not apply to your company
3. Conducting business with OFAC-sanctioned countries or people from a non-U.S. subsidiary
4. Purchasing U.S.-origin goods through a foreign-based subsidiary, with the purpose of re-exporting those goods to a country, person, or entity that is subject to OFAC sanctions
5. Using the U.S. financial system to facilitate commercial transactions with OFAC-sanctioned people or countries
6. Failing to update sanctions screening software or find data entry mistakes
7. Failing to conduct adequate due diligence on your company’s customers, supply chain, intermediaries, and counter-parties
8. Using a decentralized OFAC compliance strategy that leads to inconsistent interpretations of agency regulations and erratic compliance measures within the company
9. Allowing the use of non-standard business practices that likely indicate that the other party to the transaction is trying to evade OFAC sanctions
10. Individual employees committing OFAC misconduct abroad without the knowledge of their U.S.-based employer, and often while covering up their actions

Because these are known risks of OFAC noncompliance, the agency expects corporations to be on the lookout for them. Failing to do so can lead to more aggressive enforcement action.

5. Carefully Consider Voluntary Self-Disclosures

If you become aware of a potential OFAC violation where you engaged with a sanctioned individual or party, voluntarily self-disclosing the interaction may be in your interests. Before doing so, though, you should research trusted law firms and strongly consider hiring OFAC defense attorneys to identify promising litigation strategies, and then determine whether the interaction violated the law. If it did not violate the law, then no good can come out of the disclosure.

Taking the case to OFAC on your own can drastically mitigate the damages of the violation. This can be valuable when the violation is likely to lead to enforcement action, even if you do not disclose it. However, weighing the risks and the benefits of voluntary disclosure in an informed way is something that generally takes the help of an OFAC defense lawyer, like Dr. Nick Oberheiden. He often tells his clients that, “Self-disclosure can be tricky. On the one hand, it can reduce the penalties of the violation. On the other, you admit to the violation. Especially where it is unclear whether it actually was a violation, self-disclosing a transaction may be unwise. The specific circumstances of the case will matter a lot.”