Tri-Seal Compliance Note 2024: Quick Overview

Tri-Seal Compliance Note is when a combination of US Federal agencies jointly publish a communication. In March 2024, the Department of Commerce, the Department of the Treasury, and the Department of Justice published the following:

Obligations of foreign-based persons to comply with US sanctions and export control laws (click here to read the PDF).

This report focuses solely on US sanctions enforcement administered by the US Treasury's Office of Foreign Assets Control (OFAC). It's important to clarify that "foreign-based persons" encompasses any legal entity, whether an individual, corporation, or organization.

So why is OFAC doubling down on the global applicability of OFAC sanctions? Here are some of the reasons provided in the note:

  • Ensuring US national security
  • Mitigating sanctions evasion
  • Reinforcing compliance responsibilities for non-US entities
  • Firm reminder of legal consequences for non-compliance

Use the US Dollar? You Must Perform Sanctions Checks 

Before delving into the specifics of the compliance note, let's quickly revisit why adhering to OFAC sanctions is essential, regardless of your location. Here's a question to consider regarding your company's operations:

Does your business require US dollars in its transactions?

Access to US dollar transactions is likely essential for almost everyone (unless your company operates in a heavily sanctioned country like Iran or North Korea). It's also important to remember that since 2017, OFAC has asserted broader jurisdictional reach over non-US entities engaging in transactions without direct contact with the US (other than making payments in US dollars). 

OFAC's enforcement action against CSE Global, a Singapore-based global technology company, is historical. Why? It was the first time OFAC penalized a non-financial institution outside the US that settled a transaction with a sanctioned country in US dollars. 

OFAC Sanctions Checks Are Essential

As we now understand, regardless of your business's location or whether it trades directly with the US, conducting OFAC sanctions checks on customers and business partners becomes essential if your company engages in transactions using US dollars.

sanctions check prevents businesses from engaging in transactions with individuals and entities subject to sanctions due to their involvement in illegal or prohibited activities.

When a business performs a sanctions check, it accesses a global database (as offered by that checks to see if any customers or business partners appear on sanctions lists - such as OFAC's.

Let's now return to the Tri-Seal Compliance Note and the highlights all compliance officers need to know. 

1. Clear Emphasis on Compliance Obligations to a Foreign Audience

The March 2024 compliance note has an impactful twist. So what is it? It's intended to be read -  and understood - by a foreign audience. So whether you are a FinTech in Sydney or a software startup in Tel Aviv, OFAC is talking directly to you (not a US domestic audience).

For professionals new to compliance, perhaps you are an individual with compliance duties within your responsibilities, it may seem unusual that a compliance note from a US government agency like OFAC would directly address foreign entities. 

It's essential to understand the political side of the coin to understand this. And for clarity, this article is not political and does not present any political views. However, companies worldwide must recognize that the US government may leverage what some commentators describe as the "weaponization of the dollar" to achieve its foreign policy goals. 

It's an advantage the US has because they are an economic superpower - the dollar serving as the global reserve currency.

So what did OFAC double down on in its message regarding compliance obligations:

  • Adherence to OFAC regulations and sanctions programs
  • Compliance with restrictions related to specific conduct and deceptive transactions
  • Prohibition against involvement in activities to evade US sanctions

2. OFAC's Stern Legal Ramifications Warning

The next must-know message OFAC delivers in the Tri-Seal Compliance Note is a stern warning of the potential legal ramifications for non-compliance.

To break down the text briefly, we can divide it into three parts:

  • Civil penalties: These can result in monetary fines, the amount of which depends on the severity of the violation.
  • Criminal penalties: Violations may lead to criminal charges, potentially resulting in fines and imprisonment.
  • Strict liability: Individuals or entities may be held liable even if they were unaware of or did not intend to violate sanctions laws.

It's worth elaborating on the final point - strict liability. Similar to the approach of the UK's sanctions enforcer, the Office of Financial Sanctions Implementation (OFSI), there's a growing regulatory trend toward strict liability. In essence, this implies that OFAC can legally dismiss any excuses defendants might offer, including responsible individuals within a company. 

Ultimately, the bottom line is this: Breaking US sanctions may lead to severe repercussions that will impact your business, finances, and reputation.

Recommended reading - 2023 in Review: Noteworthy Sanctions List Violation Penalties

3. OFAC's Multiple Case Studies

The final message OFAC emphasizes is that failures in sanctions compliance carry consequences, including punishment for foreign entities, particularly those involved in transactions with a sanctioned country using US dollars. 

In the Tri-Seal Compliance Note, you can read in detail about the following case studies:

  • Toll Holdings Limited (2022)
  • Alfa Laval Middle East Ltd (2021)
  • Swedbank Latvia AS (2023) wrote about the Swedbank case, read it here: Unravelling Swedbank's $3.4 million OFAC Sanctions Penalty.

OFAC concludes its case studies section strongly: "The above examples are not an exhaustive list of all fact patterns in which a foreign person might be liable. OFAC will aggressively investigate and pursue such activity in support of high-priority foreign policy objectives."

Many of you will agree that the message is crystal clear. It also underscores that in 2024,  conducting OFAC sanctions checks on your customers and business partners is a fundamental part of doing business. 

Final Thoughts & How Supports OFAC Sanctions Compliance

The March 2024 US government Tri-Seal Compliance Note emphasizes the vital need for businesses operating beyond US borders to comply with US sanctions laws. OFAC's key message is this: if you use the US dollar, you must comply with US sanctions laws. It then reminds readers of what may happen with tangible case studies if non-compliance occurs. 

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