Every time I find myself on the security line at the airport, I watch the folks ahead of me anticipating that someone will be pulled from the line because their name appeared on the TSA “no-fly” list. I have yet to see this happen, but I sympathize with the poor schlub whose name matches that of a known evil-doer.
Many small businesses that regularly make overseas payments to customers, vendors, or clients are unaware that they too may fall victim to a lesser-known “no-fly” list. Compliments of the USA Patriot Act, these payments, often made through bank wire transfers or International “FX” payments are subject to similar scrutiny but via a less-publicized list of names.
The United States Treasury Department overseas the transfer of capital internationally and are charged with regulating these transfers. The Office of Foreign Assets Control administers and enforces various economic sanctions programs; you may be familiar with the restrictions and embargoes that are placed on countries such as North Korea or Iran which are designed to put foreign policy pressure on those and other governments. And it is not just countries with nuclear ambitions that are embargoed, but also those considered at risk for security reasons such as terrorism and narcotics trafficking.
OFAC not only has the ability to block transactions bound for specific countries, but also maintains a list of specific individuals to whom payment can be blocked or delayed. If a person’s name appears on the Specially Designated Nationals List (SDN), any payments or other financial transactions intended for them can be blocked, delayed, or even confiscated. OFAC updates and publishes this list online, but is time consuming to search and, for many businesses may be impractical to do so for every payment sent.
All US-based businesses, small and large, are responsible for complying with these regulations and a business has very little control over the policies, procedures, and penalties which can be assessed for companies which violate OFAC compliance guidelines. Most banks and international payments facilitators such as PayPal and Western Union have policies and programs in effect that will help businesses to remain in compliance and enforce OFAC rules on payments sent via their systems.
Here are a few tips on what you can do to assure that you remain in compliance and to assist should you find that a transaction you initiate is flagged or held by OFAC.
1. Know how it works. OFAC compliance is complex and the best defense is a good offense. You can learn everything you need to know on the Treasury Department website, although it can be difficult to navigate and search.
2. Check with your banking or financial institution. Your bank is a great place to start; have a conversation with your client manager or bank officer and ask what you can do on your end prior to initiating a transfer. The goal is to limit the surprises that will come your way if you attempt payment to a business, or individual from one of the affected countries or to someone on the SDN List.
3. Ask for the relevant information. A good strategy is to request from your payees the specific personal information that OFAC may require if your payment is held. This can include information such as flu and complete name, place of birth, date of birth, country of citizenship, legal residence, or profession; in addition you may be asked to provide the specific purpose of the payment. It can be a delicate matter to ask for this kind of information, but most people will be happy to comply if they understand why you are asking.
4. Stay up to date. The Treasury Department regularly updates the SDN list and you can download a PDF version of the list here. OFAC also provides an online search tool which allows you to search by individual names as well as by country, entity, or even address.
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