Whether you’re a risk manager or another kind of governance, risk and compliance professional, you know your organization can’t afford to run afoul of sanction compliance. The problem is that governmental and financial authorities, such asthe European Union, are constantly updating the list of organizations affected by sanctions, also called the sanctions list. These changing sanctions regulations and broader regulatory requirements demand constant vigilance.
Of course, none of that complexity makes compliance with these ever-shifting regulations any less mandatory. Thankfully, the Capture. Report. Protect. framework lays out a comprehensive road map for risk professionals to follow, from flagging blocked property to preparing for audits.
In this high-level overview, we’ll break down everything you need to know about the framework, including how to put it to work to standardize compliance and reporting efforts across your organization.
Why the Capture. Report. Protect. Framework Exists
Before we dive into the specifics of the Capture. Report. Protect. framework, let’s clarify the types of regulatory issues the framework was designed to help you and your organization manage.
You probably already know that financial sanctions are regulations levied by particular governmental organizations. These regulations typically aim to curtail illegal actions, such as money laundering or terrorism, by freezing assets and preventing financial institutions from facilitating transactions that ultimately serve to enable criminal activity.
OFAC: The Center of American Sanctions Enforcement
The Office of Foreign Assets Control (OFAC) is a team within the U.S. Treasury Department responsible for administering and enforcing economic sanctions. Because these sanctions are based on U.S. foreign policy goals, even mistakenly violating them can lead to severe penalties.
To help streamline sanctions compliance, OFAC provides multiple helpful resources, from the frequently updated sanctions list to intermittent updates to the Framework for OFAC Compliance Commitments.
UN, EU and UK: Where Foreign Governments Come Into Play
Of course, the U.S. Treasury Department doesn’t unilaterally decide which organizations to target with sanctions, although they do have the ultimate responsibility to enforce those laws. U.S. foreign policy is heavily influenced not only by the organizations the country belongs to, like the United Nations, but also by those the U.S. chooses to align with, such as the United Kingdom and the European Union, whose EU sanctions programs can directly affect multinational operations.
Luckily, you won’t have to personally track the policies of each of these foreign bodies individually. OFAC reflects relevant changes to the U.S. sactions regime on its website. That said, if your organization conducts business with international clients, you’ll need to be familiar with the relevant regulations in each country.
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How to Implement the Capture. Report. Protect. Framework
Now that you have some essential background on what makes building a thorough sanctions compliance program so challenging, let’s move on to the specifics of the Capture. Report. Protect. framework and how it aims to simplify those complexities.
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Capture: Gathering and Storing Data
The first focus of this framework is on the processes involved in capturing data, including which types of data you choose to collect, where you source it from and how you choose to store it. You have many methodologies to choose from as a risk manager. But when it comes to sanctions compliance programs, you want to ensure a robust set of internal controls around your data gathering protocols.
Examples of internal controls that can help enforce OFAC compliance include:
- Policies: Clearly define your organization’s existing processes for sanctions compliance, including how to report any potential breaches of protocol, in documentation available to every member of your compliance team.
- Record-keeping:Â Keeping consistent records of how and where you gather data can help you prove your commitment to regulatory compliance even in the event of an accidental violation of sanctions.
- Communication: You’ll also need to clearly convey your expectations, policies and standards to all relevant staff, including any third-party vendors that assist your organization with data collection.
Once data is properly captured, the next challenge is ensuring it is continuously assessed and audit-ready.
Report: Assessing Risk and Staying Prepared for Audits
Like any other form of risk assessment, you’ll want to establish a routine of regular checks to ensure you’re not running the risk of violating any sanctions. An effective risk assessment should account for your organization’s unique risk profile and exposure points. This routine sanctions screening should be designed to review your compliance with relevant legislation, such as anti-money laundering (AML) regulations.
Examples of reporting protocols you’ll want to incorporate into your sanctions risk assessments include:
- Regular holistic reviews: The bedrock of any effective compliance program is a routine and thorough audit of your organization’s potential risk factors. This includes performing due diligence checks on any and all partners, vendors or clients that may potentially violate sanctions, even indirectly, such as through intermediaries, as part of a broader customer due diligence process..
- Continuous testing:Â To ensure your audit process stays as efficient as possible, your organization should also codify a procedure to regularly test the process itself for efficacy, bias or any other potential issues. This procedure should be performed by a separate team independent of the functions being tested, with the necessary authority to address any issues that come up. Independent compliance teams can provide additional oversight and objectivity in this testing process.
- Clear reporting procedures:Â Your policies should ensure that there’s a well-understood path for escalating any potential concerns or risk factors up the compliance command chain as necessary.
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Protect: Building a Culture of Compliance
The final tenet of the framework is perhaps the most important: protecting the data your organization has gathered.
You may be wondering whether this step is really necessary for a sanctions-focused framework, given that violating sanctions is often a matter of unknowingly engaging with a targeted entity or facilitating access to a blocked property through an intermediary. But protecting your organization from running afoul of sanctions will take more than your usual breach detection and prevention strategies.
Here are a few examples of actions your organization’s compliance officers can take to prevent sanction issues before they happen:
- Management buy-in: One of the best ways to avoid potential problems down the line is to ensure that everyone at the most senior levels of the organization understands the importance of sanctions compliance as well as the procedures necessary to safeguard it. Management buy-in is also often a prerequisite for collecting and employing the resources you’ll need to implement an effective sanctions compliance strategy.
- Compliance training: On the other end of the corporate ladder, you’ll also want to make sure that as new employees join your organization, sanctions compliance training factors into the onboarding process. Ideally, this training will be tailored to a given employee’s role and clearly convey their individual responsibilities as part of your sanctions compliance program.
- Shared knowledge base: New employees and upper management won’t be the only members of your team in need of access to specific information about their role in your sanctions compliance program. Risk managers should make codifying and updating this information, as well as publishing it somewhere every team member can access it, an early target for any new sanctions program.
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Streamline OFAC Reporting and Avoid Compliance Concerns
This guide should serve as a useful introduction to the most important aspects of building an effective sanctions compliance program. But you’ll most likely find yourself looking for more detailed guidance as you make progress on establishing or future-proofing your policies and procedures.
For the information you’ll need to improve your compliance program, reference Jenn Plowman’s white paper, Capture. Report. Protect. Building for Compliance: Managing OFAC Sanctions Blocked Property Reporting in Onspring. Download the white paper to learn how to stay compliant with strict OFAC deadlines, 10-year retention rules and electronic filing requirements while keeping your organization audit-ready.
