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Computer Services : A Credit Union Refresher on OFAC’s Compliance Framework

As the Office of Foreign Assets Control (OFAC) celebrates the two -year anniversary of the very first Framework for OFAC Compliance Commitments, credit unions have a sensitive time period. The increased use of sanctions in response to Russia’s February 2022 invasion of Ukraine will inevitably lead to higher scrutiny of sanctions compliance programs (SCP), especially traditional ones. banks and credit unions the American Banker said are on the front lines in this fight.

Consequently, now is the time for each credit union to ensure that its SCP meets all the expectations detailed in the 2019 OFAC framework, or otherwise may face enforcement action.

Five Key Components of OFAC Compliance

The OFAC framework strongly encourages the use of a risk-based SCP with five key components. The following checklist makes it easy for your credit union to compare its SCP against OFAC’s stated expectations for each component.

1. management commitment: The senior management of your credit union legitimizes and emphasizes the importance of its SCP by:

    • Program review and approval

    • Delegate sufficient authority and autonomy to it

    • Draw direct reporting lines from them to the SCP office

    • Regular and occasional meeting at the SCP office

    • Provide adequate resources, including human capital and information technology, to the SCP

    • Name a dedicated and experienced officer to comply with OFAC sanctions

    • Ensure that risk -based controls support SCP

    • Promote a culture of compliance throughout the credit union

    • Allow staff to report concerns or issues of penalties without fear of retaliation

    • Weakening penalties related to misconduct and highlighting its effects

    • The SCP office is allowed to administer to all adherence to adherence to penalties

    • Demonstrate seriousness of any violations and implement remedial measures

2. Risk assessment: As a foundation on which to base its SCP, your credit union periodically and holistically identifies and evaluates the OFAC risks associated with these external touchpoints:

    • Direct contact with persons, parties, countries or regions prohibited by OFAC

    • Indirect association with the same, including violations of the 50% OFAC rule

    • Your members, supply chains, intermediaries and counter-parties

    • Your products and services offered

    • Your geographic footprint and the locations of your members, suppliers, intermediaries and counterparties

    • Your on-boarding member due diligence, including independent research revealing non-transparent associations of persons, parties, countries or regions prohibited by OFAC

    • Potential merger or acquisition of other credit unions or the M&A activity of your members or suppliers

3. Internal controls: Using the risk assessment as a guide, your credit union writes the OFAC compliance policies and procedures used to achieve the following goals:

    • Select and calibrate your penalty screening solution

    • Implement your internal controls through internal and/or external audits

    • Establish and maintain adequate OFAC compliance recordkeeping

    • Address known OFAC compliance weaknesses with quick and effective action

    • Share internal controls with all relevant staff through clear communication

    • Appoint staff responsible for integrating internal controls throughout the credit union

4. Testing and auditing: To assess existing internal controls and identify any program deficiencies, your credit union’s SCP includes a comprehensive, independent and objective test or audit function that meets the following description:

    • Responsible for senior management

    • Independent of audited activities

    • Adequately supported by appropriate authority, expertise, expertise and resources

    • Same as you assess the risk and efficacy level of the SCP

    • Results of a comprehensive and objective assessment of your SCP

    • There is a mechanism for immediate identification and mitigation of the causes of deficiencies

5. Training: Your credit union conducts an OFAC training program that covers the following bases:

    • Provides adequate, paper -based information and guidance to all employees

    • Gives particular attention to those in charge of activities that pose a higher risk to OFAC

    • Discuss the risk posed by your products, services, members, vendors and footprint

    • Happens every year or more often if your risk profile warrants it

    • Respond to negative test or audit results by immediate retraining of relevant staff

    • Provides easy access to OFAC training and resource materials to all available staff

Listen to OFAC’s Prior Warnings

If there is any doubt about how important OFAC’s view of its framework is, consider this: OFAC began regularly referring its framework to implementation actions six months after its publication in May 2019. References often show that the framework is an outline of how OFAC incorporates the five key components of the SCP in its evaluation, investigation and resolution of apparent violations.

That message is attached to EVERY 2020 and 2021 enforcement actions, which together amount to more than $ 44 million in civil fines. Clearly, OFAC believes that most of the shortcomings found in the cases — everything from knowledge of handling violations to inadequate assessment of indirect risk penalties and insufficient customer diligence— can be accurately identified and responded to by an SCP that fully includes all five. essential components outlined in its structure.

Until now in 2022, OFAC continues to beat this drum. Did your credit union listen?

To take a deeper look at OFAC compliance, see our white paper exploring the 50% OFAC Rule.


Terry Corley is the Director of Strategic Product Management for CSI’s Business Solutions Group.

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