OFAC's new approach to penalties could mean larger fines for sanctions violations

The Treasury Department's Office of Foreign Assets Control has changed how it calculates fines relating to sanctions violations and the change in approach could see sanctions violators pay more to settle cases

What has happened?

On 14 June 2019, The Wall Street Journal reported that the Treasury Department's Office of Foreign Assets Control (OFAC) is changing how it calculates fines relating to sanctions violations, which could result larger penalties.

What does this mean?

During a breakfast meeting of the American Bar Association Standing Committee on Law and National Security, Andrea Gacki, Director of OFAC, said that OFAC will no longer give credit for all types of fines paid to other government agencies in multi-agency settlements, but will only give credit for penalties imposed by other agencies that "relate to the same pattern of conduct for the same period of time" as OFAC's own penalties.

OFAC has already adopted this new approach in two sanctions settlements that it reached in April.

In those settlements, OFAC reduced its penalty by the amount of the penalties paid to other regulators involved in the settlements – namely, The US Justice Department, The US Federal Reserve, The New York State of Financial Services, and the UK's Financial Conduct Authority – for matching conduct occurring over the same period of time in an attempt to balance "OFAC’s desire to avoid the unnecessary piling on with the strategic use of [its] enforcement authority".

The change in approach could see sanctions violators pay more to settle cases.

Previously, OFAC’s fines in multi-regulatory settlements were covered by the amount paid to other authorities, whether or not the conduct penalised by OFAC overlapped with other agencies.

Now, only equivalent conduct over the same period of time will be consumed by other regulators' penalties.

What happens now?

The impact of this new approach is to be seen.

OFAC is already on track for a record-breaking enforcement year, handing out 18 penalties to date.

Some say this is down to a push under US President Donald Trump’s administration, and OFAC’s pursuit of conduct and industries it hasn’t scrutinised before.

On 13 June, OFAC also announced that it has made regulatory amendments to account for inflation on the maximum amount of civil monetary penalties that can be imposed for sanctions violations – meaning that its penalties are also set to increase as a result of this.

At the ABA meeting Gacki also discussed the details of a new framework – A Framework for OFAC Compliance Commitments – that outlines how US and non-US companies should ensure compliance with economic and trade sanctions.

The framework details the types of objectives which OFAC are looking for, with Gacki adding that a strong compliance program will go a long way in the event of an OFAC enforcement action.

Next steps

Please contact us if you have any questions on OFAC's new approach to sanctions settlements or how this could affect your organisation.

 

Authored by Aline Doussin, Louise Lamb, Beth Peters, Jamie Rogers and Jamie Rogers

Contacts
Aline Doussin
Partner
London
Louise Lamb
Partner
London
Beth Peters
Partner
Washington D.C.
Jamie Rogers
Counsel
Default
Daniela Vella
Senior Knowledge Lawyer
London
Keywords OFAC
Languages English
Topics Sanctions
Countries United States

 

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