Financial institution OFAC Compliance and Banking Regulatory Agencies | CPAs and Foodman Advisors


While OFAC is responsible for the promulgation, development and administration of sanctions for the United States Secretary of the Treasury, banking regulatory agencies cooperate to ensure compliance of OFAC’s financial institutions. Although OFAC is not in itself a banking regulator; its basic requirement is that financial institutions not violate the laws it enforces.

The US banking and regulatory system is complex

There are federal and state regulators. Financial institutions can have a federal charter or a state charter, or both. Different regulators may have different regulatory responsibilities for different types of financial institutions. According to the Federal Financial Institutions Examination Council (FFIEC), there are 5 regulatory bodies:

  • The Board of Governors of the Federal Reserve System (FRB),
  • The Federal Deposit Insurance Corporation (FDIC),
  • The National Credit Union Administration (NCUA),
  • The Office of the Comptroller of the Currency (OCC),
  • The Consumer Financial Protection Bureau (CFPB)

It is important for financial institutions to establish a strong OFAC compliance program and to develop internal audit procedures

Since there is no universal “prepackaged” OFAC compliance program, financial institutions must “tailor” their programs to meet their specific needs.

Banking regulators review financial institutions under their supervision to determine the adequacy of compliance programs with OFAC regulations

Regulators review financial institutions under their supervision to determine the adequacy of compliance programs with OFAC regulations. Financial institutions use software to “ban” illicit fund transfers. Many of the filters used contain all the names of the OFAC list of specially designated nationals and blocked entities, countries and cities. OFAC welcomes the use of prohibition software by financial institutions as well as its comprehensive internal compliance programs.

When a financial institution does not block and report a transfer and another financial institution does so, the non-reporting financial institution is in OFAC non-compliance

In every regulated financial institution, there should be a compliance officer responsible for monitoring compliance with its OFAC programs and an officer responsible for monitoring blocked funds.

Non-compliant financial institutions could be subject to adverse publicity, fines and criminal penalties. OFAC states that there is no single compliance program suitable for every financial institution and that there is no “prepackaged” solution. An OFAC compliance program is tailored and tailored based on the uniqueness of a specific financial institution.

Consult your compliance expert.


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