Effective Actions to Enhance OFAC Compliance
Question
ACME Bank is a $600 million institution with 15 branches within three counties. Because of its proximity to Mexico, the bank has many foreign national customers and makes many foreign wire transfers for its customers. Currently the bank's branch managers print the OFAC list of SDNs and place them in strategic places in each branch. The wire transfer department keeps its own copy of the list. The compliance officer has implemented an annual auditing program to check the bank's compliance with OFAC regulations. The findings of this audit are provided to the bank's board of directors annually. The bank's regulatory agency has indicated to management that the bank has a high risk for BSA/AML/OFAC compliance. Of the following actions, which would be the most effective to strengthen the bank's
OFAC compliance?
Answers
Explanations
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A. B. C. D.B
The most effective action to strengthen the bank's OFAC (Office of Foreign Assets Control) compliance would be to purchase and implement interdiction software for the wire transfer area (answer B).
OFAC is responsible for enforcing economic sanctions programs against foreign countries, organizations, and individuals who threaten the national security, foreign policy, or economy of the United States. To comply with OFAC regulations, financial institutions must ensure that they do not engage in transactions with individuals or entities on the OFAC's list of specially designated nationals (SDNs).
Currently, the bank's branch managers print the OFAC list of SDNs and place them in strategic places in each branch, and the wire transfer department keeps its own copy of the list. While this is a good first step, it is not sufficient for an institution with a high risk for BSA/AML/OFAC compliance like ACME Bank. Manual processes like printing and disseminating lists are prone to human error and may not keep pace with updates to the OFAC list. Additionally, OFAC compliance requires real-time screening of transactions against the SDN list, which is not possible with manual processes.
Interdiction software can automate the screening of transactions against the SDN list in real-time, reducing the risk of OFAC violations. This software can be integrated into the bank's existing wire transfer system, allowing for seamless and efficient OFAC compliance. The software can also provide an audit trail of all OFAC-related transactions, which can assist the bank's compliance officer in their annual auditing program.
Conducting compliance audits twice a year (answer A) is a good practice, but it alone will not sufficiently address the high risk of OFAC compliance. Additionally, audit findings provided to the board of directors annually may not be timely enough to prevent OFAC violations.
Requiring the BSA (Bank Secrecy Act) officer to check the OFAC website daily for any changes to the SDN list (answer C) is a good internal control procedure, but it is not sufficient for an institution with a high risk for BSA/AML/OFAC compliance like ACME Bank. Checking the OFAC website daily does not ensure that all transactions are screened against the SDN list in real-time.
Routinely providing account transaction information to federal security agencies so suspicious patterns can be detected (answer D) is a separate issue from OFAC compliance. It pertains to anti-money laundering (AML) and suspicious activity monitoring. While it is a good practice for AML compliance, it is not relevant to OFAC compliance.
