CUNA Makes Recommendations to OFAC on Enforcement Interim Final Rule

WASHINGTON-While generally supporting the Office of Foreign Asset Control’s interim final rule regarding economic sanctions enforcement procedures, CUNA did request a few adjustments. “CUNA supports OFAC’s separate enforcement process for credit unions and other financial institutions, which is designed to take into consideration the role of such institutions, the nature of the transactions in which they engage, and the fact that they are heavily regulated,” the March 13 letter by Senior Regulatory Counsel Catherine Orr read. OFAC is attempting to take more of an institutional rather than transactional approach to enforcement, looking at an institution’s violations over time rather than each individual violation. The interim final rule institutes a periodic review for institutions with violations or suspected violations as appropriate, which would not impact other institutions. This provision makes an exception for “significant violations for which prompt action.is appropriate.” Orr said she was concerned that `significant violation’ was not defined and that it should be addressed in the guidelines. She also stated CUNA’s support for considering asset size in determining the appropriateness of its compliance program, among other factors. However, CUNA did take issue with the definition of voluntary disclosure as one of the elements in determining appropriate administrative/ enforcement actions. “Specifically, we have a concern with the term `voluntary’ defined in this context to be contingent on another party’s requirement to file a report on the same transaction, whether or not the other party actually files a report,” according to Orr. CUNA said this will not achieve the agency’s goal of encouraging voluntary disclosure and urged OFAC to change its definition of voluntary to include disclosures that may have already been provided by another party. She explained, “Financial institutions typically are doing their best to report information to OFAC voluntarily and are not always able to know or control whether or not another party reports information to OFAC.” CUNA recommended further incentives for voluntary reporting such as zero or low penalties for first offenses and significant fine reductions for voluntary reporting. “We feel strongly that these would assist OFAC’s efforts to obtain timely information to most effectively administer and enforce economic and trade sanctions programs against targeted countries and groups of individuals, such as terrorists and narcotics traffickers,” Orr wrote. CUNA agreed with OFAC’s proposed 30-day time period to respond to enforcement actions but suggested permitting a 30-day extension upon request. A review of the enforcement procedures after one year to assess their effectiveness and for industry feedback would be prudent, according to the trade association. -