stop! paying that $100 invoice could cost your organization … · 2019-12-04 · the accounts...

The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 3/31/2016

STOP! Paying that $100

Invoice Could Cost your

Organization $100s in Fines!

Pam Miller Senior Trainer :: IOFM

The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 2 3/31/2016

What is OFAC?

• Oregon Freight Advisory Committee? – NO

• Olmstead Falls Airport Committee? – NO

• Office of Financial Accounting Control? – NO

• Ontario Farm Animal Council? – NO

• Ohio Financial Accountability Certification? – NO

• Office of Foreign Assets Control? YES!


Agency of the US Treasury • https://www.treasury.gov/about/organizational-

structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx

• Its mission: “…administers and enforces economic and trade

sanctions based on US foreign policy and national security

goals against

– targeted foreign countries and regimes,

– terrorists,

– international narcotics traffickers,

– those engaged in activities related to the proliferation

of weapons of mass destruction…”

https://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx













So What Does It Do? • It maintains lists of individuals & entities involved

in the proscribed activities

– In order to prevent transfers of funds to them

• It can impose controls/restrictions on transactions

• And it can freeze assets under US jurisdiction

– Transactions made by US persons

– Virtually all transactions made in USD

• And it can levy fines against payors – big fines


Lists • SDN (Specially Designated Nationals) list

– Individuals & companies owned or acting on

behalf of targeted countries

– Non-country specific individuals & entities, too

• Drug traffickers and terrorists

• FTO (Foreign Terrorist Organizations) list

– Rolled into the SDN list

– Secretary of State lists organizations for 2

years, then re-assesses


The Lists Serve to • Support US efforts to curb terrorism financing

and encourage

other nations to do the same.

• Heighten the public’s

awareness and knowledge of

terrorist organizations.

• Stigmatize and isolate designated terrorist

organizations internationally.


US Persons

• May not acquire goods or services

from those on the list

• May not make payments to

those on the list

• Period!


Who is a US Person? • Varies a bit by sanction type but at a minimum:

– US citizen

– Permanent resident alien

– Entity organized under US laws

(including foreign branches)

– Any individual or entity in the US

– Foreign entities that operate in the US or

partially in the US


OFAC Doesn’t Act Alone • Many sanctions are based on those imposed by the

UN and other countries lists such as:

• Canadian OSFI list

• UN Consolidated list

• EU Consolidated list

• UK list

• Australian DFAT list

• CH SEKO (Europe)

• World Bank List of Debarred Parties


This is Serious Business

• The US is a bit more serious about this

than many other countries

• Many of them strongly encourage

compliance

• The US uses civil & criminal

penalties to enforce compliance

–Yeah, including jail time


And you Thought Government

Agencies are Inefficient • 2009 Congress increased maximum fine cap from

$11,000 to $250,000 per violation or twice the value of

the underlying transaction

• 2011 OFAC collected $91,650,055

• 2012 OFAC collected $1.1 billion

• 2013 OFAC collected $137 million

• 2014 OFAC collected$1,207,067,713

• January through November 2015 = $599,705,997


Real Money that Real Organizations

have AGREED to Pay in Fines

• PayPal: $7.7 million for 486

sanctions violations that totaled $43,934

• Commerzbank AG: $1.45 billion in criminal and

civil penalties

• Bank of America: $16.5 million for 208

transactions that totaled $91,192 plus failure to

block 5 accounts owned by 10 persons on the

SDN list


¯\_(ツ)_/¯ • Yes, these are all financial institutions

• While heavy focus is on financial institutions,

no organization is exempted from compliance

• ESCO Corp, maker of steel casings: $2 million

• Schlumberger Oilfield Holdings: $232.7 million

– Schlumberger is not a US person but their

Drilling & Measurements (D&M) unit is Texas

based


Are you Checking Vendors to See if They are

Okay to Pay?

• Many organizations are not

– Because they never heard of OFAC

– Because they don’t think it applies

• “We only use US based vendors”

• “We don’t export or import”

– Because they just don’t know how – where to

begin

• BTW – this is not new – OFAC created in 1950


Don’t Rely on the Name or Address

• Some names sound perfectly innocent

• And some vendors have US addresses

– Like Shelimar Real Estate Holdings II, Inc. of

Miami, FL

– Or Masters International Inc. of Lakeland, FL

– Or Running Brook LLC of Miami, FL

• Of course, then there is Altaf Khanani

Money Laundering Organization


Where to Begin • If you are a US organization paying US

vendors only the likelihood that you are paying

someone on the list may be low, but…

• From now on, check the list before entering a

new vendor into the system

– Better yet, involve purchasing – the list should

be checked prior to entering into an agreement

to acquire goods or services

• Add this step to your VMF policies & procedures


There are Two Ways to

Check the List • Download the list – .PDF or text formats

• https://sanctionssearch.ofac.treas.gov/

• As of 1/28/16 there were 944 pages in the

.PDF format of the list – 3 columns per

page

https://sanctionssearch.ofac.treas.gov/



Or Use the Handy Search Box


And Sign Up!

• For the RSS feed

• Or e-mail updates


In Addition • Come up with a plan for comparing

existing vendors to the list

– Organizations that have a plan

in place fare better

– Instead of a $ settlement they

may receive a “Finding of Violation”

• Enshrine OFAC compliance in your

policies & procedures!


Use a Risk Based Approach • Do you pay non-US vendors?

– Start with them

– FATCA reviews may uncover previously unknown

foreign payees/recipients

• Incorporate OFAC catch up into vendor clean up project

• While it may make sense to start with largest

vendors first, big well-known corporations are

unlikely to be on the list

– Start with mid-sized vendors that are frequently paid

– Don’t skip donations and charities


Additional Thoughts • Consider implementing an OFAC review as

vendors appear on payment runs

– Yes, it takes time but this method focuses effort

on vendors that are truly active

• Flag vendors in the system that have been

checked and are okay

• But you must re-review periodically

– Things change

– That’s why you sign up for updates


False Positives/Hit Lists

• Misspellings, mistranslations, name similarities, etc.

• Find a match, carefully review, discover your vendor is

okay, make a note to avoid in depth research in the future

• But that’s not the end of it

• The BMO Harris Bank violation was in regard to

their false hit list

• Caused OFAC to issue new rules

• In essence, require that these lists

be reviewed regularly just to be sure


Beyond OFAC • Global organizations or those that trade

internationally have additional lists to check

– These checks must be incorporated into

procedures, too

• And, of course, there is quite a bit of variation in how

various countries and the UN compose their lists

• And the lists keep growing

• Enforcement is being stepped up globally

• Ensuring compliance is a complex challenge


The Three Biggest Lists • OFAC, the UK Department of Treasury, & the EU

• Find the UK list at:

– https://www.gov.uk/government/publications/fi

nancial-sanctions-consolidated-list-of-

targets/consolidated-list-of-targets

• It can be downloaded in multiple formats

• And additional information is also available

at the link

https://www.gov.uk/government/publications/financial-sanctions-consolidated-list-of-targets/consolidated-list-of-targets




















European Union

• Find the EU list at:

– http://eeas.europa.eu/cfsp/sanctions/consol-

list/index_en.htm

• You can also subscribe to an RSS feed of

updates

• General information regarding EU sanctions can

be found at:

– http://eeas.europa.eu/cfsp/sanctions/index_en.htm

http://eeas.europa.eu/cfsp/sanctions/consol-list/index_en.htm




http://eeas.europa.eu/cfsp/sanctions/index_en.htm

http://eeas.europa.eu/cfsp/sanctions/index_en.htm


Linky Party

• Find the UN consolidated list at:

– https://www.un.org/sc/suborg/en/sanctions/

un-sc-consolidated-list

• Find the Canada OSFI list at:

– http://www.osfi-bsif.gc.ca/Eng/fi-if/amlc-

clrpc/atf-fat/Pages/default.aspx

https://www.un.org/sc/suborg/en/sanctions/un-sc-consolidated-list









http://www.osfi-bsif.gc.ca/Eng/fi-if/amlc-clrpc/atf-fat/Pages/default.aspx











Linky Party, continued • Find the Australian DFAT list at:

– http://dfat.gov.au/international-

relations/security/sanctions/pages/consolidated-

list.aspx

• Find the World Bank list at:

– http://web.worldbank.org/external/default/main?t

heSitePK=84266&contentMDK=64069844&me

nuPK=116730&pagePK=64148989&piPK=6414

8984

http://dfat.gov.au/international-relations/security/sanctions/pages/consolidated-list.aspx





http://web.worldbank.org/external/default/main?theSitePK=84266&contentMDK=64069844&menuPK=116730&pagePK=64148989&piPK=64148984





Help is Available • 3rd parties have developed offerings that include

checking vendors against OFAC and other lists

– Those offering SIM (Supplier Information

Management) apps in particular

• And there are compliance apps

– How do they work?

• What lists do they check?

– Are they configurable?

• And many banks that outsource payment

processing also check OFAC & other lists


Before you Sign on the Dotted Line • Understand how they perform the checks

• Understand how the information will be delivered

to your organization

• Implement controls & manage the relationship

• Use of a 3rd party doesn’t shift liability to them –

it still belongs to your organization

• Is there recourse or a penalty provision in the

contract?

– They should have a nickel in it!


Just One More Way • That AP adds value to the organization

• Solid compliance with sanctions

requirements

– Saves money in terms of less exposure to risk

of fines & possible other civil & criminal

penalties

– Protects the organization from bad publicity

– And it is the right thing to do!


Questions?

[email protected]

stop! paying that $100 invoice could cost your organization … · 2019-12-04 · the accounts...

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