Online transactions tied to sanctioned countries could lead to monetary fines for individuals, businesses and banks, even when it's unclear that the Web sites involved are blacklisted, say former OFAC officials and consultants.
The U.S. Treasury Department called on financial institutions to freeze the assets of 17 Zimbabwean companies and a supporter of the country's president, Robert Mugabe, on Friday.
OFAC guidance issued last month essentially blocks business dealings with any entity at least 50 percent owned "directly or indirectly" by any person targeted by OFAC sanctions, whether or not the entity itself has been sanctioned.
As monitoring technology improves, banking compliance professionals expect the U.S. Treasury Department to require that banks monitor their online services for possible economic sanctions violations.
The department's Office of Foreign Assets Control, the U.S. government's chief enforcer of economic sanctions, said that Key Bank National Association operated accounts for an entity and person in Iran.
A federal court has ordered the U.S. Treasury Department to release e-mails and letters from individuals complaining that they have been unfairly ensnared by targeted financial sanctions.
The designations require U.S. institutions to turn down business and freeze the assets of an Iranian military leader, two Shia extremist leaders and a former Iraqi Parliament member believed to be secretly operating a television station in Syria.
An executive order, issued by President Bush on July 17, requires U.S. financial institutions to block, or freeze, the transactions of people or organizations that commit or "pose a significant risk of committing" a violent act intended to undermine Iraqi stability.
Betsy Sue Scott, former head of the civil penalties division, says a recent increase of the maximum fines for OFAC violations will better fit the punishment to the crime. Violators previously were only receiving a "slap on the wrist" for serious offenses, she says.
The law, enacted last week, increases civil penalty amounts fivefold but will be used chiefly in the enforcement of "major cases," an OFAC official said Monday.
The list of specially designated nationals falls short because little information, often only a name and potential aliases, is provided about individuals named on the list, some say.
National Australia Bank's remittance of $100,000 to the U.S. Treasury's Office of Foreign Assets Control to settle charges that it violated economic sanctions against Cuba and other countries marked the largest settlement with OFAC by a bank this year. But the penalty could have been much larger.
The Office of the Comptroller of the Currency cited a Hong Kong bank for "significant deficiencies" in its correspondent banking operations that hinder the bank's ability to combat money laundering and terrorist financing.
Great Wall Airlines was removed from the Office of Foreign Assets Control's Specially Designated Nationals and Blocked Persons list on Dec. 12, allowing U.S. institutions to do business with the company.