Why Your Business Needs to Screen Vendors Through OFAC

As a business owner or financial leader, it's crucial to understand the importance of OFAC screening.

The Office of Foreign Assets Control (OFAC) is a department of the US Treasury that enforces economic and trade sanctions against foreign countries and individuals. By including OFAC screening as part of your vendor management process, you’ll ensure compliance with these sanctions and avoid unwanted consequences.

Reduce Risk

There are several good reasons your company should be screening vendors against the OFAC list, and they all boil down to one thing: protecting your company from unintended risk. If you do business with international suppliers your risk is far greater, but all US persons/businesses are required to comply with OFAC rules.

Failing to comply with the regulations is considered a matter of national security, so the consequences can be quite steep – financially, legally, or both.

Avoid Fines and Penalties

OFAC screening minimizes financial risks long-term. If you do transact with individuals or entities that are subject to OFAC sanctions, it can result in significant fines for your company. These fines can range from a few thousand to millions of dollars.

Prevent Fraud

OFAC screening can help prevent fraud and money laundering. By conducting OFAC screening, companies can identify potential red flags and take action to prevent illegal activities from occurring. This can help to protect your company from financial loss and legal liabilities.

Be in Good Standing

Neglecting OFAC screening can damage your reputation, making it difficult to do business with other companies or individuals in the future.

The sanctions list is updated on a regular basis, so it’s important to make OFAC screening a routine task. Accounts Payable departments typically include it as part of the vendor onboarding process, and it should be incorporated into an ongoing AP workflow.

Overall, OFAC screening is an essential part of any company's risk management strategy. By conducting OFAC screening, you’ll avoid financial and reputational risks, prevent fraud and money laundering, and ensure compliance with relevant laws and regulations.