10 January 2005

OFAC Compliance in U.S. Financial Institutions...

Foreign Assets Control Regulations for the U.S. Financial Services industry is a vital area of operational risk management in the enterprise. Institutions need to make sure that their employees and not just the compliance officer are enforcing the regulations.

The Office of Foreign Assets Control (OFAC) administers a series of
laws that impose economic sanctions against hostile targets to further
U.S. foreign policy and national security objectives. Economic sanctions
are powerful foreign policy tools. Their success requires the active
participation and support of every financial institution. The use of
sanctions by the U.S. goes back to the earliest days of the Republic
through trade embargoes, blocked assets controls, and other commercial
and financial restrictions. Many of them have been multilateralized
within the global community against pariah countries, as well as being
used against groups, such as narcotics traffickers and terrorists, who
threaten the security, economy, and safety of the United States.
Management of sanctions on the U.S. side is entrusted to the Secretary of
the Treasury.

It is often difficult to balance the demands of Federal and State bank
examiners with limitations on time, resources, and manpower imposed
by bank management. While every financial institution must comply
with the same laws and regulations, no one compliance program can be
prepackaged for everyone in the open marketplace. Every program must
be tailored to meet the needs and structure of individual financial

"financial institutions" include:

* banks, including:
o insured
o commercial
o trust companies
o private bankers
o U.S. branches of foreign banks
o credit unions
o thrift institutions
* introducing brokers
* commodities broker dealers
* commodity trading advisors
* commodity pool operators
* securities broker dealers
* futures commission merchants
* issuers, redeemers or cashers of travelers checks, checks, money orders, or similar instruments
* operators of credit card systems
* telegraph companies
* insurance companies
* loan or finance companies
* investment bankers or companies
* persons or companies involved in real estate closings and settlements
* currency exchanges
* casinos, card clubs, and gaming establishments
* money transmitters
* pawnbrokers
* travel agencies
* automobile, airplane and boat dealers
* dealers in precious metals, stones or jewels
* U.S. Postal Service or any agency of U.S., state or local government carrying out a duty or power of business

Under the provisions of the Patriot Act, the Department of Treasury has, or soon will specify anti-money laundering compliance program regulations specific to each above-listed industry. The Patriot Act, at a minimum, requires that these programs include:

1. the development of internal policies, procedures, and controls;
2. the designation of a compliance officer;
3. an ongoing employee training program; and
4. an independent audit function to test programs.

Each financial institution is also required to implement a Customer Identification Program (CIP) that includes reasonable procedures to:

1. collect identifying information about customers opening an account
2. verify that the customers are who they say they are
3. maintain records of the information used to verify their identity
4. determine whether the customer appears on any list of suspected terrorists or terrorist organizations

For more information on how you can tailor your compliance program for your institution contact 1SecureAudit who can provide you with:

Compliance Policies & Procedures Customization

> Employee Training

> Due Diligence & Internal Investigations

> Automated Systems for SDN

> Independent Audits

> Anti-Money Laundering Compliance Programs

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