If you are considering doing business in a foreign country, take a careful look to be sure that you are not violating U.S. or international sanctions. Making a mistake could have serious financial repercussions for your company.
While U.S. sanctions against countries like Russia, North Korea and Iran have made headlines this year, all of us should be sure that we are in compliance with the many restrictions on doing business with certain individuals, companies, banks and other nations.
The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury administers and enforces economic and trade sanctions to protect national security and other interests. It also publishes a list of individuals, groups, and entities, such as terrorists and narcotics traffickers called Specially Designated Nationals (SDNs). The assets of SDNs may be blocked and they may be denied access to the U.S. banking system.
In its efforts to fight threats to the nation, OFAC may investigate transactions outside the U.S. For instance, one could be opening an office in South America in partnership with a local entrepreneur who has passed one’s due diligence screening. But if a bank account is established in a financial institution on the OFAC list, its funds and assets could be subjected to OFAC sanctioning. Talking with a forensic accountant or an attorney familiar with OFAC’s global regulatory reach could help with avoiding a compromising and costly situation. In 2014, Paris-based BMP Paribas paid $8.9 billion for illegally processing financial transactions on behalf of Sudanese, Iranian, and Cuban entities subject to U.S. economic sanctions.
Currently, OFAC is administering nearly 30 different sanctions programs in the Western Hemisphere, affecting Cuba and Venezuela. Other programs include the “Countering America’s Adversaries Through Sanctions Act” of 2017 and the
"Blocking the Property of Certain Persons Engaging in Significant Malicious Cyber-Enabled Activities."
The federal agency also issues interpretive guidance on issues related to the sanctions programs it administers in order to address complex topics. Again, a knowledgeable professional can help with keeping current with OFAC’s requirements and the pitfalls that can occur in overseas transactions.
Along with OFAC fines and penalties, you and your company could also face significant tax consequences. Business owners and professionals should also understand that the Internal Revenue Service (IRS) may conduct investigations in conjunction with OFAC, posing another potential financial liability for non-compliant transactions.
So, be very careful when doing business with an individual or organization that could be considered a potential threat to the U.S. Pay close attention to the flow of money, as well, to be sure you comply with all U.S. banking and tax regulations. Advance planning can help you stay in compliance with the constantly changing U.S. regulatory landscape.