Office of Foreign Asset Control Check (OFCA)

Office of Foreign Asset Control Check (OFCA)

The Office of Foreign Asset Control (OFAC) database check encompasses 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, and other threats to the national security, foreign policy or economy of the United States.

In other words, The Office of Foreign Assets Control (OFAC) is part of the U.S. Treasury which concludes whether an entity or individual is allowable to do business with the United States, especially in regards to finances and trade. If an entity or individual is caught violating this, they can have criminal penalties brought up against them including fines between $50,000 to $10 million and imprisonment between 10-30 years.

OFAC Check – Targeted Groups:

  • Terrorists
  • International Drug Traffickers
  • Those involved in the Proliferation of Weapons of Mass Destruction
  • Threats to National Security, Foreign Policy or the US Economy
  • Diamond Trading

OFAC Check – Targeted Countries:

  • Balkans
  • Belarus
  • Burma
  • Cote D’Ivoire (Ivory Coast)
  • Cuba
  • Congo
  • Iran
  • Iraq
  • Lebanon
  • Liberia
  • Libya
  • North Korea
  • Somalia
  • Sudan
  • Syria
  • Zimbabwe

Businesses that frequently require the OFAC Check:

  • Financial
  • Export/Import/Money Services
  • Insurance

Securities and Exchange Commission:

Coins falling downThe U.S. Securities and Exchange Commission (SEC) is a federal government agency which is responsible for enforcing federal securities laws as well as regulating stock and options exchanges and other electronic markets in the U.S. When the SEC was established in 1934, it was created to prevent corporate abuses relating to the sale and offering of securities.

The SEC can bring civil enforcement actions against those (individuals or companies) who have committed accounting fraud, provided false information, have engaged in insider trading or have violated any other securities law.

The SEC also enforces the requirement that public companies submit quarterly and annual reports which outline financial reports, operations and details of how the company is doing.

The SEC has administered seven major laws which govern the securities industry:

  1. The Securities Act of 1933: Instituted after the Stock Market crash of 1929, this law requires all offers and sales of securities must be registered with the SEC, unless an exemption from registration exists under the law.
  2. The Securities Exchange Act of 1934: Governs the secondary trading of securities and established the SEC as the enforcement agency of U.S. Federal Securities Law.
  3. The Trust Indenture Act of 1939: Requires the appointment of an independent trustee to act for the benefit of the securities holders and specifies provisions for the trust agreement between the issuer and the trustee.
  4. The Investment Company Act of 1940: Detailed the provisions of financial regulation in the U.S.
  5. The Investment Advisers Act of 1940: Defined the role and responsibilities of investment advisors.
  6. The Sarbanes-Oxley Act of 2002: Named after the legislative sponsors, Senator Sarbanes and House Representative Oxley, this law set new standards and regulations for all public company boards, management and public accounting firms.
  7. The Credit Rating Agency Reform of 2006: Amended the Securities Exchange Act of 1934 which now allows smaller credit ratings companies with at least three years experience to register as statistical ratings organizations (NRSROs).

Financial Industry Regulatory Authority: The Financial Industry Regulatory Authority, Inc. (FINRA) is an independent private corporation which regulates brokerage firms and exchange markets including all securities firms doing business in the U.S. FINRA oversees 4,400 brokerage firms and over 630,000 registered securities representatives.

OFAC Check Terms to Know:

Capital Market: Financial market where investors can buy and sell debt or equity backed securities long term.

Debarment: To exclude or forbid an individual or entity from doing something, having certain possessions, rights or practices

Exchange: A marketplace where securities and other financial instruments are traded.

Financial Market: Any marketplace where buyers and sellers participate in trading assets. The assets traded can include equities, bonds, currencies and derivatives.

Futures Market: An auction market where commodity/future contracts are bought and sold. These are to be delivered on a specific date in the future.

Nationally recognized statistical rating organization (NRSROs): A credit rating agency which permits financial firms to use for regulatory purposes

Prohibited Transactions: A financial transaction or trade which may not be completed by individuals unless specifically authorized by OFAC.

Sanction: Punishment for the noncompliance of a law or decree.

Securities Market: An exchange where security trading is conducted by professional stockbrokers.

Security: A tradable asset of any kind.

Specially Designated Nationals (SDN): An individual or entity on the OFAC blocked people list. A company that is owned, controlled or acting on behalf of targeted countries or individuals in which members are in the targeted groups.
The search also encompasses the Specially Designated Nationals (SDN) list and GSA Sanctions.

Stock Market: A market where stocks and bonds are traded; stock markets promote fair and organized trading.

Weak Aliases: An alias that is generic which may produce a large number of false hits. These aliases are included because many times the sanctioned target either is referred to this name by others or uses it as a nickname and the alias can be used as an identifier. The alias may confirm (or deny) a possible match if it fits with the other identifying information.

Criteria that determines if an alias should be deemed as “weak”:

  1. Length of name
  2. If the alias contains numbers
  3. The existence of common words which are generally used in nicknames (Example- Alexander the Great)
  4. The indication of a geographical location (Example- Elizabeth of the United Kingdom)
  5. The presence of a common prefix which is only one of two names in the alias (Example- Mr. Jones)

Still have more questions about the specific sanctions for each country? A complete list of all sanctions and country information can be found here.

Who must observe OFAC regulations?

All individuals in the U.S. must comply with the regulations and trade sanctions set forth by OFAC. This also includes entities (businesses) within the U.S. and their foreign branches.  All U.S. companies that own or control foreign subsidiaries must comply as well. If an entity or individual does not comply, they are not permitted to do business in the U.S., especially in the financial and trade sectors and then put on the Specially Designated Nationals and Blocked Persons List.

Is my company required to search for all aliases, even if they are deemed "weak"?

OFAC does not necessarily require a specific process when screening candidates. It is advised, however, to search for weak aliases since it could be a determining factor whether the candidate is a match or not.

Article Library

For Crimcheck News on the Office of Foreign Asset Control, Check Out These Informative Articles:

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