US banks seek OFAC guidance on new ten-year sanctions recordkeeping rules

The American Bankers Association has requested guidance from the Treasury’s Office of Foreign Assets Control on implementing new ten-year recordkeeping requirements for sanctions compliance.

Friday’s letter to OFAC Acting Director Lisa Palluconi highlights challenges banks face in complying with the revised rule, which extends record retention from five to ten years for transactions subject to sanctions regulations. The rule became effective 12 March, after OFAC delayed implementation by six months.

For the first time, banks must keep records for ten years exclusively for the purpose of complying with new sanctions recordkeeping requirements, the ABA stated in its letter. It also noted that while the textual changes to OFAC’s recordkeeping rule appear minimal, the practical implications are significant. Banks previously relied on existing five-year retention schedules that aligned with other regulatory requirements, including Bank Secrecy Act recordkeeping rules.

‘When OFAC’s requirement matched other regulatory requirements, banks did not need to specifically conclude that various retained records were also being kept for sanctions compliance purposes. Those determinations will now be necessary,’ the letter explained.

The ABA cited beneficial ownership information as an example, noting that banks retain such records for five years under customer due diligence rule requirements dictated by the Treasury’s Financial Crimes Enforcement Network. Under the new OFAC rule, banks must now assess whether retaining subsets of those records for an additional five years is necessary for sanctions compliance.

Bank policies, procedures and operations were all developed in reliance on OFAC’s five-year requirement, the association noted, adding that additional implementation guidance would help clarify OFAC’s new requirements and expectations for all stakeholders.

The ABA emphasised that guidance would assist ‘banks, their sanctions compliance professionals, their bank examiners and primary regulators, and other important stakeholders understand the new recordkeeping requirements’.

https://www.aba.com/advocacy/policy-analysis/ofac-letter-on-final-rule-guidance