OFAC Trying to Expedite Licensing Applications, OFAC Official Says

An Office of Foreign Assets Control official said the agency within the Treasury is trying to “expedite” responses on license applications but does not have the resources to lift certain compliance burdens that have caused headaches for U.S. companies, such as regulations that require businesses to determine which companies are owned 50 percent or more by a sanctioned party. “That’s something were trying to work on,” said Susan Demske, OFAC’s assistant director for regulatory affairs.

Alongside Commerce officials during the Bureau of Industry and Security's 2019 Export Conference, Demske fielded questions -- some of them critical of OFAC -- related to the struggles U.S. companies face with export license procedures and the burden they say is being placed on the private sector.

During the July 9 panel, one compliance manager in the audience implored Demske for improvements on the licensing processes. Demske said improving that system is a “top priority” and OFAC is “constantly trying to refine the process.” But she also said there are “so many factors” that go into license applications. “Obviously it's something we’re going to try to expedite,” Demske said. “It’s a very complex calculation, but we are really trying to do the best that we can.”

Another compliance manager in the audience said the 50 percent majority ownership rule -- where companies must research and determine if entities they are dealing with are owned more than half by a sanctioned entity -- is “unfair.” The compliance manager said the requirement is too time-consuming and costly, and suggested that OFAC compile the list and post it publicly to aid U.S. businesses.

While Demske acknowledged OFAC is aware some companies struggle with the requirement, she said OFAC cannot do the research. “There’s no way that we’re ever going to be able to match the capacity and resources” to compile that list, she said. “There’s just no way that OFAC can ever be able to meet that challenge.”

Dan Clutch, special agent in charge of BIS’s Office of Export Enforcement, said companies should keep track of their due diligence efforts, which could help minimize penalties in enforcement cases. “If you can show the efforts that you made to do your due diligence or to look into the ownership and you can document that, that’s going to be a mitigating factor, even if you are found to be in violation,” Clutch said during the panel.

But he also suggested that companies abandon business with some companies if they are unable to verify that they are in compliance with U.S. sanctions. “I know this is may be easy for me to say as a government official talking to the private sector, but, I don’t know, is it worth it?” Clutch said. “Sometimes if you look at a situation, if you’re trying to spend a lot of effort to figure out how you can make that transaction work, maybe it’s not worth it.”