Were you ready for the October 2003 USA Patriot Act final ruling for having proper tools and customer identification procedures in place?
The United States Department of the Treasury exemptions from prosecution under the USA Patriot Act (now Public Law 107-56) have expired. All Financial Institutions should now have written procedures in place that include checking their ‘customer’ name against the government’s listing of known terrorists and money launderers before any financial transaction. Checking this official government Specially Designated Nationals (SDN) listing is one of the first steps in identifying who we are doing business with. The Sanction Law requirements have not changed for many years. A fearsome thought because many of the companies I speak with have not been doing this and may not realize their significant exposure, both for the business and personally. With fines of $10,000,000 and 30 years prison for each illegal transaction, these are about the most serious laws in our nation.
The government presently expects you to check the sanctions listing as maintained by the Treasury’s Office of Foreign Assets Control (OFAC) before you execute business transactions. The most current version of the U.S. Treasury’s listing of Specially Designated Nationals can be found at the Office of Foreign Asset Control web site. If you are not using this current listing, you are at risk and not in compliance. What the USA Patriot Act requires is for you to have written Customer Identification Procedures (CIP) in place to help guide your staff and have ‘proof’ that you are checking this SDN listing. See page 119, lines 8-24: http://www.fincen.gov/hr3162.pdf.
The USA Patriot Act was passed in October 2001 and all exemptions expired in October 2003, two years after enactment. Two years of getting ready has past and they will not ‘understand’ if you perform an illegal transaction. As the extension only applied to having written ‘procedures’ in place, the government assumed you were already cross checking your customers and vendors against the Treasury’s current SDN listing. It is one thing to get caught with no written procedures (USA Patriot Act), it could be business and personal ruination to get caught doing business with a known sanctioned entity identified on the SDN listing (Sanction Law). Further, you must attempt to ascertain that your ‘customer or vendor’ or extended parties to the transaction are not associated (i.e. fronts) with a listed Specially Designated National entity before you allow the transaction to proceed. If you have proper procedures and tools in place and slip and allow a sanctioned transaction, the government could possibly mitigate the fines and punishment (up to $10,000,000.00 / 30 years prison per offense). If you have nothing in place when it happens, there will be no mitigation and they will make public all involved with the illegal transaction. It could ruin your business and devastate your life.
The USA Patriot Act was enacted because many Americans were (unknowingly) performing transactions with terrorists, drug traffickers, money launderers, etc. in unawareness or defiance of our existing Sanction Laws. Remember, these persons (terrorists, money launderers, etc.) are living among us. All financial companies are included and are subject to the USA Patriot Act. The reason certain industries [see page 2 Background http://www.fincen.gov/352fininst.pdf ] were specifically mentioned to require procedures is those industries, including travel; sales of automotive, motorcycle, boat, aircraft; real estate; insurance; precious metals and jewels; check cashing; pawnbrokers; loan and finance; telegraph; title companies; and others, have been historically exploited by criminals and sanctioned persons to siphon ‘cleaned’ monies from our economy for their illegal use.
Consider for a moment that if only a few companies in America are complying with the Act, we are not accomplishing our goal of stopping the financial drain on our economy. In other words, American businesses have been and are still cooperating (perhaps unknowingly) with these money launderers (and others), sustaining their illegal activities. Do any of your customers' names appear on the current listing?
Simply, you must at least check your customer against the government’s current official SDN listing in order to not violate our sanction laws. The listing is public at U.S. Treasury - Office of Foreign Assets Control but is not a friendly or easy to use tool. For frequency of updates see: U.S. Treasury - Recent OFAC Actions
I do not foresee this requirement going away during our lifetimes. Please don’t get caught up in this without the proper tools and procedures in place. Also, contact other business associates to make sure they have proper tools and procedures in place. Whether you are caught or your competitor down the street, you both would suffer from the negative publicity for your industry.
You must have written CIP procedures in place now to be in compliance with the USA Patriot Act. Why take the chance on (inadvertently) doing business with someone on the SDN listing? Staff members enthusiastically perform the name check when they understand the reasons why and are aware of the possible repercussions for not being diligent.
For those of you who are complying with the Sanction Laws and the USA Patriot Act, as an American I applaud and thank you and ask that you join me in making others aware of this critical area of protecting our business, livelihood, and country.
Update Software Services
5103 Skyline Village Court, Alexandria, VA 22302-1039
The following assertion dated 11/06/2002 answers the question:
“Who in America is subject to our Sanction Laws?”
FAC No. GEN-208565
All U.S. persons must comply with OFAC regulations, including all U.S. citizens and permanent resident aliens regardless of where they are located, all persons and entities within the United States, all U.S. incorporated entities and their foreign branches. In the cases of certain programs, such as those regarding Cuba and North Korea, all foreign subsidiaries owned or controlled by U.S. companies also must comply. Certain programs also require foreign persons in possession of U.S. origin goods to comply.
In answer to your question about who is responsible for ensuring that sanctions are not violated, every U.S. person is responsible for not violating the sanctions.
Senior Compliance Officer
U.S. Department of the Treasury
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