News 09 May 2019

‘Integrate compliance into M&A process’ – OFAC

‘Compliance functions should also be integrated into the merger, acquisition, and integration process. Whether in an advisory capacity or as a participant, the organization engages in appropriate due diligence to ensure that sanctions-related issues are identified, escalated to the relevant senior levels, addressed prior to the conclusion of any transaction, and incorporated into the organization’s risk assessment process.’

So says a recent document published by the Office of Foreign Assets Control (‘OFAC’), the purpose of which, says OFAC, is to ‘provide organizations subject to U.S. jurisdiction, as well as foreign entities that conduct business in or with the United States or U.S. persons, or that use U.S.-origin goods or services, with a framework on the essential components of a sanctions compliance program.’

The document, ‘A Framework for OFAC Compliance Commitments’, says that OFAC ‘strongly encourages’ entities subject to its jurisdiction ‘to employ a risk-based approach to sanctions compliance by developing, implementing, and routinely updating a sanctions compliance program (SCP)…

‘While each risk-based SCP will vary depending on a variety of factors – including the company’s size and sophistication, products and services, customers and counterparties, and geographic locations – each program should be predicated on and incorporate at least five essential components of compliance: (1) management commitment; (2) risk assessment; (3) internal controls; (4) testing and auditing; and (5) training.’

Further guidance includes: ‘If after conducting an investigation and determining that a civil monetary penalty (“CMP”) is the appropriate administrative action in response to an apparent violation, the Office of Compliance and Enforcement (OCE) will determine which of the following or other elements should be incorporated into the subject person’s SCP as part of any accompanying settlement agreement, as appropriate…When applying the Guidelines to a given factual situation, OFAC will consider favorably subject persons that had effective SCPs at the time of an apparent violation.’


See here for the information: