OFAC Enforcement
Receiving an official letter from the Office of Foreign Assets Control (OFAC) — a division of the U.S. Department of the Treasury — is one of the most serious challenges that any company or individual engaged in international activities can face. This is not merely a request for information. It is a signal of the initiation of a formal enforcement process, which could result in multimillion-dollar fines, reputational collapse, and even criminal prosecution. Attempting to ignore such a notice or respond to it without professional legal preparation is a strategic mistake with catastrophic consequences.
Effective defense in OFAC cases requires a deep understanding not only of sanctions legislation but also of the internal mechanics of the regulator’s operations. Success depends on an immediate response, conducting a thorough internal investigation, and establishing precise communication with U.S. authorities.
What is OFAC enforcement and how does an investigation begin?
Enforcement of OFAC is a set of measures aimed at identifying, investigating, and penalizing violations of U.S. economic and trade sanctions. This process is initiated when the regulator has reason to believe that an individual or company has directly or indirectly violated one of the numerous sanctions regimes. Sources of information for OFAC can include reports from financial institutions, tips from whistleblowers, data from open sources, or information from other government agencies.
Most often, a formal investigation begins with the issuance of an Administrative Subpoena. This is a legally binding document that requires the recipient to provide comprehensive information and documentation related to specific transactions or business relationships. The subpoena may request contracts, bank statements, business correspondence, and any other information that will help OFAC reconstruct the full picture of events.
Receiving such a document means that your activities are already under close scrutiny. OFAC does not issue subpoenas randomly. The regulator has preliminary information that raised suspicions, and its goal is to obtain evidence to confirm or refute the fact of violating U.S. sanctions. It is important to understand that at this stage, you are no longer just a market participant but a subject of an official investigation with all the resulting legal consequences.
Our lawyers specialize in OFAC enforcement practice and provide comprehensive support to clients facing sanctions risks or investigations. Our goal is to protect your interests, minimize potential damage, and ensure your activities comply with U.S. law.
Key areas of our work:
- Proactive consulting and internal investigations
The best way to avoid problems with OFAC is to prevent them. We help clients identify and eliminate potential risks before they attract the regulator’s attention.
Sanctions audit: We conduct a comprehensive review of business processes, counterparties, and transactions for compliance with current sanctions regimes.
Internal investigations: In case of suspicion of a possible violation, we organize a confidential internal investigation to establish the facts, assess risks, and develop a strategy for further actions. - Representation during OFAC investigations
If your company or you personally have become the subject of an OFAC investigation, it is crucial to immediately involve experienced lawyers. We provide full support at all stages of interaction with the regulator:
Responses to requests and subpoenas: We prepare legally accurate responses to administrative subpoenas (subpoenas) and other OFAC requests.
Communication with the regulator: We conduct all negotiations with OFAC representatives, building a constructive dialogue to protect your position. - Voluntary Self-Disclosure of Violations (Voluntary Self-Disclosure)
In some cases, the most effective strategy is voluntarily informing OFAC about the identified violation. Such a step demonstrates a responsible approach and can lead to significant mitigation of penalties, and in some situations — to their complete absence, limited to just a Cautionary Letter. We assist in preparing and submitting a comprehensive disclosure that will protect your interests to the fullest extent. - Dispute Resolution and Negotiations
Our deep expertise in the OFAC methodology allows us to effectively negotiate settlements. We analyze all circumstances of the case, including mitigating and aggravating factors, the degree of cooperation, and the nature of the violation, to achieve the most favorable outcome for the client, whether it be a reduction in the penalty amount or reaching a settlement agreement.
- International financial institutions in investigations on suspicion of violating various sanctions programs.
- Logistics and transportation companies operating in high-risk regions, including Iran.
- Technological and IT companies whose services or products could have been used in violation of sanctions.
- American and European companies with shareholders, employees, or business interests in countries under sanctions.
- Private individuals, including U.S. citizens, in cases related to violations of sanctions against Russia (including Crimea) and other jurisdictions.
Working with OFAC sanctions requires not only knowledge of the laws but also an understanding of the regulator’s logic. We are ready to provide you with this expertise to protect your business and your future.
Stages of OFAC investigation
The OFAC enforcement process is a formalized and multi-stage procedure. Understanding each stage allows you to build an effective defense strategy, respond promptly to regulator requests, and minimize potential risks to your business. The entire process can be conditionally divided into several key stages.
The main steps that a company or individual goes through during an investigation:
- Receiving a subpoena and immediate actions. The first step after receiving a subpoena is to immediately contact lawyers specializing in sanctions law. It is critically important to halt any routine document destruction processes and issue a litigation hold. Any attempts to conceal or destroy information will be regarded as an aggravating circumstance and will significantly worsen your situation;
- Conducting a privileged internal investigation. Simultaneously with preparing a response for OFAC, your lawyers should initiate an internal investigation under attorney-client privilege. Its goal is to stay ahead of the regulator and obtain an objective picture of what happened. It is necessary to determine whether a violation occurred, whether it was intentional or accidental, which employees were involved, and how serious the systemic failures in the company’s compliance procedures are;
- Preparation of a strategic response to an OFAC subpoena. Responding to a subpoena is not just a mechanical submission of the requested documents. It is the first opportunity to present your version of events and outline your legal position. The documents must be accompanied by an explanatory letter that frames the facts in a favorable light, demonstrates a willingness to cooperate, and highlights the steps taken to remedy the situation. This stage lays the foundation for all subsequent negotiations.
- Communication and negotiations with OFAC. After receiving your response, OFAC may send additional requests to clarify details. At this stage, your lawyers engage in direct dialogue with representatives of the agency. The goal of the negotiations is to convince OFAC of the presence of mitigating circumstances, prove the absence of malicious intent, and, if a violation did occur, agree on a fair resolution of the case, which may include a reduction in the penalty amount;
- Completion of the case and possible outcomes. The investigation can conclude in various ways. In the best-case scenario, OFAC will issue a No-Action Letter. If the violation was minor, the regulator may limit itself to issuing a Cautionary Letter. In the case of a proven violation, the most likely outcome is a Settlement, under which the company agrees to pay a fine and fulfill certain conditions, such as improving its compliance program.
Voluntary Self-Disclosure (VSD): A Strategic Tool for Mitigating Consequences
What to do if during your internal audit you discover a sanctions violation even before OFAC contacts you? In such a situation, U.S. legislation provides a powerful tool — the Voluntary Self-Disclosure (VSD) procedure. This is a proactive notification to OFAC about the fact of the violation, its circumstances, and the corrective measures taken.
The submission of a VSD is one of the strongest mitigating factors. It demonstrates your commitment to compliance with the law and a responsible approach to conducting business. According to the official OFAC guidelines, timely and complete voluntary disclosure can reduce the base penalty amount by 50%. This turns a potentially devastating penalty into a manageable financial loss.
However, the decision to submit a VSD must be carefully considered. This step requires full readiness for cooperation and the provision of all necessary information. Incomplete or untimely disclosure may not be counted as a mitigating factor. Therefore, before submitting a VSD, it is necessary to conduct a comprehensive internal investigation under the guidance of experienced lawyers to fully understand the scope of the issue and be prepared for dialogue with the regulator.
Factors influencing the size of an OFAC penalty
OFAC uses special Enforcement Guidelines to determine the appropriate penalty amount. The decision is never arbitrary; it is based on a comprehensive analysis of aggravating and mitigating factors, which collectively determine the final penalty amount. Understanding these factors helps to develop the right defense strategy.
Below is a table summarizing the key factors that OFAC takes into account when making a decision.
| Mitigating Factors | Aggravating Factors |
|---|---|
| Voluntary Self-Disclosure (VSD): Proactive notification to OFAC about a violation. | Intentional violation: Evidence that the violation was deliberate or committed with the purpose of circumventing sanctions. |
| Full cooperation with the investigation: Timely provision of accurate and complete information. | Concealment of information: Attempts to hide, destroy, or falsify evidence. |
| The presence of an effective compliance program: The existence and operation of internal policies for sanctions compliance at the time of the violation. | Awareness of top management: Involvement or knowledge of a violation by the company’s top management. |
| Remedial Action: Steps taken to correct deficiencies and prevent future violations. | Causing significant harm to the objectives of the sanctions program: If the violator’s actions have seriously undermined U.S. policy. |
| The absence of violations in the past: If this is the first violation for the company in the last five years. | The absence of a compliance program: Complete disregard for the creation of internal control systems. |
| Insignificant transaction volume: If the total amount of transactions that violated sanctions was small. | Repeated violations: The presence of similar violations in the past. |
Consequences of Sanctions Violations: More Than Just Fines
Financial sanctions are just one of the tools in OFAC’s arsenal. In addition to monetary penalties, which can amount to millions of dollars, a company and its management may face other serious consequences that affect both their reputation and the very ability to conduct operational activities. These indirect risks often turn out to be even more destructive than the direct fine.
It is necessary to consider the full range of potential negative consequences. Here are some of them that go beyond financial losses:
- Reputational damage. The publication of information about the investigation and OFAC fines causes irreparable harm to business reputation. Partners, clients, and creditors may reconsider their relationships with the company, fearing their own risks;
- Criminal prosecution. In cases of intentional and serious violations, OFAC may refer the case to the U.S. Department of Justice (DOJ) for criminal proceedings. This threatens not only fines but also imprisonment for executives and employees involved in the criminal scheme;
- Refusal of banking services (“De-risking”). Financial institutions around the world are extremely sensitive to sanction risks. Upon learning about an OFAC investigation, banks may unilaterally close a company’s accounts and refuse to process any transactions to protect themselves. This can completely paralyze the business;
- Inclusion in sanction lists. In exceptional cases, for particularly egregious violations, a company or individual may themselves be added to one of the sanction lists, for example, the SDN List. This is a “death sentence” for any international business, completely cutting off access to the global financial system.
Why do you need a sanctions lawyer?
The confrontation with OFAC is not a battle that can be won alone. The complexity of legislation, the regulator’s aggressive stance, and high stakes require the involvement of highly specialized lawyers. A qualified sanctions attorney is not just a consultant. They are your strategist, negotiator, and defender at all stages of the process.
An OFAC investigation is a marathon, not a sprint. Choosing the right legal partner from the very beginning of this journey determines whether you can protect your assets, reputation, and the future of your business. If you have received a request from OFAC or suspect that you may have violated sanctions, do not delay.
Contact us for a complete and confidential consultation regarding your situation.
