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OFAC Sanctions Breaches: Serious Consequences and Increasing International Enforcement Efforts

A post by Vegamx.net 


Penalties for breaching OFAC sanctions : OFAC considers violations a serious threat to national security and foreign relations. Therefore, offenders face financial penalties —ranging from a few thousand dollars to several million—and prison time up to 30 years. As of 2020, parties that break the Trading with the Enemy Act, for instance, face fines of about $90,000 per violation.


Violating the International Emergency Economic Powers Acts come with penalties of about $308,000 per violation. Similarly, breaking the Foreign Narcotics Kingpin Designation Act costs about $1.5 million per violation. The severity of punishments depends on the crime and the number of prior convictions. Firms that have paid massive penalties—many over $1 billion—include UniCredit Bank, ZTE Corporation, Standard Chartered, Crédit Agricole, Société Générale and BNP Paribas. Standard Chartered, for example, In 2019, agreed to pay $1.1 billion to settle allegations that it violated sanctions on Iran and other countries, which ended long-running probes by the U.S. Justice Department, the U.K. Financial Conduct Authority and other agencies.


Beyond monetary penalties, sanctions violations can bring on a host of other consequences for companies. For instance, the enforcing agency could require the company to complete an independent audit, make specific compliance program improvements, or submit periodic reports on the company’s compliance program. Cases may be publicized by the US government, which can cause problems with banks and other third parties that see this as increasing the risks in dealing with the company. Public enforcement cases can also cause reputational damage.


The number of US government sanction designations grew from 912 to 9,421, skyrocketing by 933%, in the two decades from 2000 to 2021, according to economist Timothy Taylor’s review of OFAC data.



Through the creation of the G7 Enforcement Coordination Mechanism and other multi-national enforcement efforts, the US is strengthening economic sanctions against Russia by ramping up its enforcement against violators. Although the current focus is Russia, this new mechanism also lays the foundations for increased coordination on other sanctions programs in the future. Since G7 will be coordinating on an international basis, companies will need to ensure that the compliance program is global, multi jurisdictional in nature and that they are coordinating internally, between the legal, compliance, and investigations functions.


Analysis of Dow Jones sanctions data as of 2021 shows that sanctions on vessels are growing at an average of 6% annually in recent years, spiking in 2019 with an 11% full-year increase.


The guidance is clear that irrespective of the point in a transaction – whether you’re an insurer, a bank, a trading group, a bunker provider, or any other part of the ocean supply chain, Maritime is in focus for the regulatory authorities.

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