OFAC is Required, Not Recommended

Admittedly, I am a social media junkie and belong to numerous Facebook groups, both professional and personal. On the daily, I visit group pages to catch up on hot topics, see what the members are conversing about and of course engross in some trashy reality TV updates. Recently, while scrolling through some auto-industry-related groups I came across some chatter on the topic of OFAC. I am a glutton for punishment, so I am going to take a stab at the reality of OFAC.

Though the regulations do not specifically list the automotive industry as a required party, simple translation of the requirement means before anyone does business with any consumer, they are obligated to check the list. 

Who is OFAC?

Controlled by the U.S. Department of Treasury, the Office of Foreign Assets Control (OFAC) oversees and enforces economic sanctions against groups of individuals such as terrorists, drug dealers, and money launderers. OFAC recently has been adding bitcoin dealers to the list. They are known as Specially Designated Nationals (SDNs) and OFAC is responsible for maintaining a current list of these individuals.

All U.S. citizens must comply with checking the OFAC list prior to conducting any business. Though the regulations do not specifically list the automotive industry as a required party, simple translation of the requirement means before anyone does business with any consumer, they are obligated to check the list. 

Checking the consumer against the list does not stop there. If the trade-in or the down payment was provided by a third party, the business is obligated to run those names against the OFAC list. As part of their compliance process, dealerships should train their sales and F&I managers to confirm OFAC clearance and how to clear a potential hit. If the dealership fails to check any party against the OFAC list, they are subject to criminal and civil fines, as well as possible imprisonment depending on the severity of the violation. 

As mentioned above, before the dealership moves forward with any transaction, it should run all parties involved against the OFAC list.  This includes all types of transactions: retail, lease, wholesale, and cash deals. There are several resources that provide OFAC results. The first is an analog process where the dealership prints a complete, up-to-date list from the OFAC website (which is 1,400-plus pages in length) and manually search through the names for a possible hit. 

The second option is for the dealership to visit the OFAC website (https://sanctionssearch.ofac.treas.gov/) and run a search against the list to get clearance.

Finally, there’s the option of using a credit bureau provider such as DealerTrack, RouteOne, or 700 Credit (to name a few). These software providers will automatically pull OFAC results once the dealership enrolls and pays a per-request fee.  

Once the dealership receives a cleared OFAC check, it needs to place proof of the clearance in the deal jacket. If the dealership uses the analog approach, print, date, and sign a copy of the page where the party(ies) would be located on the printed copy. If searching the OFAC website, print, date and sign the results page from the website. Finally, if using a software provider print a copy of the results from the credit report. 

The dealership can now move forward with the transaction. 

Clearing a Potential Hit

Say the dealership gets an OFAC hit, pumps the brakes, and does a little more research to confirm it is a valid hit. The OFAC flowchart gives you the steps you must follow to clear a potential OFAC hit. Once you conclude you received a false hit, document the conclusion and move forward with the transaction.

If the dealership determines it has a valid hit, do not proceed with the transaction, and immediately contact OFAC via telephone (800-540-6322) or the OFAC website. Make sure you document any specifics received from OFAC. You cannot proceed with the transaction until you obtain clearance. 

This flowchart assists you with the steps a dealer should take when clearing OFAC. Checking OFAC is not a recommendation – it is required by federal statute. Not taking it seriously could result in major consequences for the dealer. 

Penny Bell is an associate with gvo3 & Associates.  gvo3 & Associates is a consulting firm that specializes in developing and implementing a compliance management system for dealers around the country.