Question: We are in the process of updating our OFAC policy and procedure manual. I
have some questions relating to blocking vs rejection of funds.
I understand that SDNs and Blocked Persons are subject to having funds blocked. I understand that there are certain entities who must have transactions rejected. I'm not clear about the rejections.
My questions: If we have a 'hit,' first of all, must we call each time to see if the SDN's transaction must be rejected vs processed and blocked? (I have read that we are required to accept the transaction, if blocked) Second, if we have a 'hit' and find that the customer is on the OFAC list, are we required to open the account and block the funds? If not, when we reject the transaction, must we file a rejected transaction report (if the customer is not subject to the rejection provision). We are a small bank in a rural area, and hopefully we won't have to deal with this. But I would like to know what to do on the off chance that we are faced with the problem.
Answer: There are very, very few instances where rejection is required, rather than blocking. To see the few instances where a transaction must be rejected, go to this page: http://www.bankersonline.com/ofac/
and click on the link for the OFAC sanctions matrix.
For example, all accounts belonging to persons or entities in Iran or the Government of Iran must be REJECTED. The likelihood of a person or entity in Iran, or the Government of Iran, seeking to open an account is extremely miniscule. But if you do discover that you have such a situation, you must reject the account.
Most OFAC-related transactions you will encounter will involve blocking, since the overwhelming majority of the affected entities/individuals are subject to blocking sanctions.
If you have a "hit" and you aren't able to determine for yourself that it is just a false positive, you call OFAC in order to obtain their help in determining whether it really is the affected individual or entity. If it is an SDN or blocked entity, you automatically know that you will be required to block the funds. If it involves something OTHER THAN an SDN or blocked entity and you think, from reading the OFAC program
summaries or using the sanctions matrix, that you may be required to reject the transaction, you can confirm that with OFAC.
If you check the list BEFORE you accept money or property from the individual and you discover they are subject to blocking and you decide you would just prefer to not open the account, you can just turn the person away and no report to OFAC will be required because this wasn't a rejected transaction under OFAC, nor was it blocking. You simply
declined to do business with someone -- which is something you can choose to do for a variety of reasons.
BankersOnline is a free service made possible by the generous support of our
advertisers and sponsors. Advertisers and sponsors are not responsible for site content. Please help us keep BankersOnline FREE to all
banking professionals. Support our advertisers and sponsors by clicking
through to learn more about their products and services.