BSA / OFAC Matters: New Sanctions Against Russia and Belarus
On May 8, 2022, the United States, through the Office of Foreign Assets Control (OFAC), introduced new sanctions against Russia and Belarus. The new sanctions will take effect on June 7, 2022, and will prohibit any accounting, entity formation, or consulting services to any Russian or Belarusian person or entity. The new sanctions also mean financial institutions may not assist anyone in a transaction with a Russian or Belarusian person or entity.
Financial institutions should ensure the following:
- Review core system updates to include areas such as, but not limited to, Automated Clearing House (ACH) transactions for originators, incoming ACH files, wires processing systems, automated Bank Secrecy Act (BSA) system lists, and onboarding systems;
- Consider vendor management risk and review compliance with these sanctions; and
- Review the screening for new accounts, loans, Letters of Credit, International Letters of Credit, and other third-party offerings. Third-party offerings include, but are not limited to, Third Party Payment Processors, ACH originators, Qualified Intermediaries and other similar account types, and / or Escrow Accounts / FBO accounts
Existing customers should be reviewed, and new customer procedures should be enhanced for the following items:
- Do any of your customers (or your customer’s customers) have any connection to Russia or Belarus?
- Are any of your customers (or your customer’s customers) 50% or more controlled by a Russian or Belarusian person or entity? Likely identified through beneficial ownership.
- Are any of your customers (or your customer’s customers) owned by offshore holding entities based in tax haven countries?
- Will your customers (or your customer’s customers) engage in any transactions related to Russia or Belarus?
- Do any of your customers have Russian or Belarusian citizenship? We recommend you seek counsel if your client is a dual citizen of Russia or Belarus.
Automated systems (Verafin/Abrigo/FCRM/etc.) are generally updated by the vendor with certain sanctions. Financial institutions should have an understanding of what their role is for updating these programs. As noted above, programs to consider, but not limited to: ACH (for customers and business originators), funds transfers, mobile transactions, point-of-sale (POS) transactions, etc. Manual programs will have a variation of the list given and are likely managed and updated by the core provider of the financial institution. Again, the financial institution should ensure they are apprised of these updates.
Financial institutions should pay particular attention to the sections on Blocked Transactions and Prohibited Transactions in the FFIEC BSA/AML Office of Foreign Assets Control – Office of Foreign Assets Control manual.
How Can We Help?
CLA has a robust regulatory compliance team that continues to provide seamless, integrated capabilities to our clients. Whether you need help understanding these sanctions, navigating your automated system parameters, or need a trusted advisor, we’ll get you there. Contact Us to learn more.
Karen focuses on regulatory compliance, BSA, compliance management systems and special projects, such as compliance risk assessments and BSA assessments.
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