Penalties and Risks

If you fail to comply with OFAC requirements, you can be subject to both criminal and civil penalties. The nature of the criminal penalty depends on which federal statute you violate, but all of the penalties are severe. For example, the Trading With the Enemy Act provides for ten years imprisonment, a $1 million fine for corporations, and a $100,000 fine for individuals, as well as forfeiture of funds or other property involved in violations. (50 USC App. §§ 1-44) The Iraqi Sanctions Act provides for 12 years imprisonment and a $1 million corporate or personal fine.

In short, the law provides plenty of motivation for you to comply as best you can.

After learning how severe the criminal and civil penalties are, you might be inclined to block any account or reject any transaction that appears the least bit suspicious. There are risks under that approach also. For example, blocking a checking account is likely to result in the depositor bouncing checks. Bounced checks can cause the depositor lots of trouble, such as a damaged business reputation, bounced-check fees, and even criminal liability. On the lending side, refusing to allow advances against a contracted for line of credit, for example, could cause a business to go under. Either of these or similar scenarios could trigger litigation against your institution, and you would not be in a good position if your actions turn out to be not required by the OFAC regulations.

These risks provide further motivation for you to take advantage of the OFAC hot line mentioned earlier in the chapter. It seems likely (though we are not familiar with cases holding this way) that if your actions were approved or directed by OFAC, your position in the litigation would improve. If you are involved in litigation or other dispute-resolution proceedings involving blocked property or rejected transactions, you must report that to OFAC, as is described in the next section.