Footnote 1:  All U.S. persons must comply with OFAC regulations, including all U.S. citizens and permanent resident aliens, regardless of where they are located; all persons and entities within the United States; and all U.S.-incorporated entities and their foreign branches. Accordingly, all U.S. financial institutions; their branches and agencies; international banking facilities; and domestic and overseas branches, offices, and subsidiaries must comply with OFAC regulations, 31 Code of Federal Regulations (C.F.R.) Chapter V.

Footnote 2:  FBAs include the FDIC, Office of the Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS), Federal Reserve Board (FRB), and National Credit Union Administration (NCUA), which collectively form the Federal Financial Institutions Examination Council (FFIEC).

Footnote 3:  Financial institutions should compare new accounts, which include deposits, loans, trusts, safe deposit boxes, investments, credit cards, and foreign office accounts, and existing customer accounts against OFAC’s SDN list. Blocked accounts are those for which payments, transfers, withdrawals, or other dealings may not be made except as licensed by OFAC or otherwise authorized by the Treasury Department. Transactions include automated clearing house transactions, funds transfers, letters of credit, non-customer transactions, and the sale of monetary instruments. In some cases, the underlying transaction may be prohibited, but there is no blockable interest in the transaction. In these cases, the financial institution should reject the transaction.

Footnote 4:  Property is anything of value, such as money, checks, drafts, debts, obligations, notes, bills of sale, evidences of title, negotiable instruments, trade acceptances, contracts, and anything else real (tangible or intangible), or personal, and present, future, or contingent interests.

Footnote 5:  OFAC has the authority, through a licensing process, to permit certain transactions that would otherwise be prohibited under OFAC regulations when OFAC determines that the transaction does not undermine the U.S. policy objectives of the particular sanctions program, or is otherwise justified by U.S. national security or foreign policy objectives. In addition, OFAC can promulgate general licenses that authorize categories of transactions, such as allowing reasonable service charges on blocked accounts, without the need for a case-by-case authorization from OFAC.

Footnote 6:  The Bank Secrecy Act of 1970, Public Law 91-508.

Footnote 7:  Interagency guidance was issued by members of the FFIEC, FinCEN, and OFAC in June 2005 and was updated in July 2006.

Footnote 8:   On July 28, 2006, the FFIEC issued a revised BSA/AML Examination Manual. Revisions that relate to OFAC include additional guidance on domestic and cross-border, automated clearing-house transactions.

Footnote 9:  Interim final rule 31 C.F.R. 501.

Footnote 10:  Financial institutions may use “interdiction” software packages to compare transactions and accounts against the OFAC SDN list and assist the institution in determining which transactions and/or accounts should be blocked or rejected.

Footnote 11:  A significant deficiency is a systemic or pervasive compliance deficiency or reporting and recordkeeping violation, including a situation in which a banking organization fails to respond to supervisory warnings concerning OFAC compliance deficiencies or systemic violations.

Footnote 12:  On March 31, 2004, the FDIC OIG issued Audit Report No. 04-017 entitled, Supervisory Actions Taken for Bank Secrecy Act Violations. The audit objective was to determine whether DSC had adequately followed up on reported BSA violations to ensure that institutions implemented appropriate corrective action.

Footnote 13:  On September 29, 2006, the FDIC OIG issued Audit Report No. 06-024 entitled, Division of Supervision and Consumer Protection’s Supervisory Actions Taken for Compliance Violations. The audit objective was to determine whether DSC had adequately addressed the violations and deficiencies reported in compliance examinations to ensure that FDIC-supervised institutions took appropriate corrective action.

Footnote 14:  The ED Modules are an examination tool that focuses on risk management practices and guides examiners to establish the appropriate examination scope. The modules incorporate questions and points of consideration into examination procedures to specifically address a bank's risk management strategies for each of its major business activities. In addition, the modules direct examiners to consider areas of potential risk and associated risk control practices, thereby facilitating a more effective supervisory program.

Footnote 15:  GAO report entitled, Foreign Regimes’ Assets: The United States Faces Challenges in Recovering Assets, but Has Mechanisms That Could Guide Future Efforts (GAO-04-1006, dated September 14, 2004), and Treasury Department OIG report entitled, Foreign Assets Control: OFAC’s Ability To Monitor Financial Institution Compliance Is Limited Due To Legislative Impairments (OIG-02-082, dated April 26, 2002). According to OFAC, however, to the extent that these reports may be understood to conclude that its authority to conduct compliance reviews is impaired, OFAC respectfully disagrees.

Footnote 16:  The January 12, 2006 Federal Register contained guidance on OFAC enforcement procedures entitled, Economic Sanctions Enforcement Procedures for Banking Institutions, taking into account that each financial institution’s situation is different and that financial institutions’ compliance programs should be tailored to their unique circumstances. OFAC’s review of information may include, but not be limited to, the evaluation of a financial institution’s OFAC compliance program by its primary federal regulator; the institution’s history of OFAC compliance; the circumstances surrounding any apparent violation, including what appear to be patterns or weaknesses in an institution’s compliance program and whether they indicate negligence or a fundamental flaw in the compliance effort or system and whether they were voluntarily disclosed; and enforcement information provided by the institution to OFAC.