OFAC Sanctions And Your Business Overview
The U.S. Department of Treasury, Office of Foreign Assets Control (OFAC) is a governmental agency responsible for administering sanctions against targeted foreign governments, individuals, entities, and practices.
OFAC is tasked with using the economic force of the United States to help enact foreign policy, anti-proliferation, and other goals.
The scope of OFAC rules and regulations includes blocking assets of foreign parties, trade restrictions, and controlling financial transactions, among other things. OFAC has jurisdiction over all U.S. persons and citizens, and foreign entities, which means the scope of this agency’s reach is very far.
In order to comply with these complex rules, companies must employ and conduct strong Restricted Party Screening. Without such efforts, a company may find itself in trouble similar to Amazon or Apple!
Case Overview: Amazon Settles OFAC Sanctions Compliance
On July 8, 2020, Amazon.com entered into a settlement agreement with the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) to settle potential civil liabilities for “apparent violations of multiple OFAC sanctions programs” and has agreed to pay $134,523.
OFAC specifically states, “The settlement amount reflects OFAC’s determination that Amazon’s apparent violations were non-egregious and voluntarily self-disclosed, and further reflects the significant remedial measures implemented by Amazon upon discovery of the apparent violations.”
What We Know About The Amazon OFAC Sanctions
From November 15, 2011, through October 18, 2018, persons in Crimea, Iran and Syria placed orders and/or otherwise conducted business on Amazon’s website for goods as well as Amazon also accepted and processed orders on its websites for persons located in or employed by the foreign missions of Cuba, Iran, North Korea, Sudan, and Syria.
In addition, Amazon also accepted and processed orders from persons on OFAC’s List of Specially Designated Nationals (SDNs).
From a review of the agreement, Amazon’s automated screening sanction process failed to analyze all transactions thoroughly and customer data relevant and, in some cases, failed to recognize a city or area in a sanctioned jurisdiction.
One example provided was that Amazon’s screening tool failed to flag a city in Crimea “Yalta” as well as a variation of the spelling of “Crimea” as “Krimea.” Amazon also disclosed to OFAC that it failed to report 362 transactions involving Crimea.
OFAC Considered The Following To Be Aggravating Factors
- Amazon failed to exercise due caution or care when it implemented sanctions screening processes that failed to properly flag transactions involving blocked persons and sanctioned jurisdictions.
- Some of the apparent violations related to Amazon’s processing of orders for personal security products on behalf of persons located at the Iranian embassies in Tokyo, Japan, and in Brussels, Belgium.
- Amazon provides consumer goods and services via its e-commerce websites and processes billions of global transactions annually and is one of the largest and most commercially sophisticated companies in the world.
OFAC Considered The Following To Be Mitigating Factors
- Amazon voluntarily self-disclosed and cooperated with OFAC.
- Amazon undertook significant remedial measures to address its sanctions screening deficiencies such as:
- Investing substantial resources to improve Amazon’s overall sanctions compliance program.
- Employing internal and third-party sources to conduct a thorough review of Amazon’s sanctions compliance program and its automated screening systems.
- Incorporating additional automated preventative screening controls designed to scale and operate effectively for its overall retail business;
- Enhancing its sanctioned jurisdiction Internet Protocol (IP) blocking controls;
- Bolstering its export and sanctions compliance training programs;
- Expanding the use of specific export control and sanctions provisions and the language of those provisions in its agreements.
What Else We Learned From This OFAC Sanctions Ruling
- The importance of implementing and maintaining effective, risk-based sanctions compliance controls, including sanctions screening measures appropriate for e-commerce and other internet-based businesses that operate on a global scale as outlined in the OFAC compliance framework.
- Companies that rely heavily on automated sanctions screening processes should take reasonable, risk-based steps to ensure that their processes are appropriately configured to screen relevant customer information and to capture data quality issues, such as common misspellings.
- Routine testing of these processes to ensure effectiveness and identify deficiencies may also be appropriate.
Reminders from the Amazon Case
- This settlement agreement follows an earlier settlement agreement between OFAC and Apple in late 2019. Apple had similar compliance issues surrounding Restricted Party Screening. OFAC is paying attention!
- Robust Restricted Party Screening is important. Don’t ignore this part of your business.
- Ensure that your screening process accounts for misspellings, broad geographic settings, and data integrity.
- Restricted Party Screening is more important but also more challenging for intangible exports and those operating in an e-Commerce environment.
- OFAC encourages exporters to implement a Sanctions Compliance program and employ compliance tools … “that are commensurate with the speed and scale of their business operations.
What Your Business Can Learn From Amazon’s OFAC Sanctions
You might be wondering how these OFAC sanctions apply to your business, and how you can avoid similar sanctions. Here are a few of the takeaways that you can consider when thinking about the basics:
- Who are you exporting to?
- What are you exporting?
- Where are you exporting?
- What is your product being used for?
What’s clear is that OFAC is placing considerable resources in enforcement efforts and as a result is reminding exporters to pay attention to compliance with their regulations. However, as we all know, OFAC regulations are complex and nuanced and as a result, can make developing a robust but efficient compliance program difficult.
If you need assistance in developing an OFAC Compliance Program, please contact Export Solutions. Export Solutions Inc. was also recently featured in The Wall Street Journal: https://www.wsj.com/articles/surge-in-sanctions-lifts-compliance-services-11583444176
Rebecca Yeager is a Trade Compliance Consultant for Export Solutions -- a full-service consulting firm that specializes in helping companies comply with U.S. and international import/export regulations.