KLEIN CENTRAL OPERATIONS - Bankers Online



KLEIN CENTRAL OPERATIONS

PROCEDURE MANUAL

OFAC ACTIVITIES Revised 11/1/01

PURPOSE:

The purpose of the OFAC Activities procedure is to completely comply with OFAC regulators, and to help ensure no funds are transferred into or out of accounts blocked in accordance with OFAC sanctions. In the event a funds transfer is attempted, we will ensure compliance with reporting procedures.

BACKGROUND:

The Office of Foreign Assets Control (“OFAC”) oversees the enforcement of federally-mandated economic sanctions against certain foreign governments, financial institutions, and "specially designated nationals" (individuals or companies which have been named as targets of sanctions either due to drug trafficking, terrorism, or some other illegal activity.) To comply with the regulations, C.Ops must have a compliance program in place so that we are able to react to frequent changes to the sanction lists, and can identify accounts or transactions which would be subject to the sanctions.

The OFAC sanctions are numerous and varied. The actual prohibited transactions or requirements vary, depending upon the sanctions applicable to a particular entity. Total compliance with OFAC sanctions requires a great deal of information, some of which my need to be obtained with legal assistance. Our procedures have been developed with this in mind, and do not address specific issues with specific governments or entities.

RETENTION:

SDN List must be kept current at all times (it is not necessary to keep prior SDN lists)

OFAC mandatory reporting – 5 years

Listing if Blocked accounts – 5 years

Listing of Unblocked accounts – 5 years after date of release

Legal Opinions and research - permanent

RESPONSIBILITY:

Central Operations Fedline Team (wire monitoring)

Central Operations Specialist Team (reporting and compliance)

SUPPLIES REQUIRED:

Internet Access

Treasury Reporting forms

PROCEDURES:

Maintaining the Specially Designated Nationals (SDN) List…

The SDN list is the most important piece of the OFAC compliance process. This is the master list, created and updated by OFAC, of all entities and institutions that are affected by OFAC sanctions in some way.

Notifications of SDN List Updates

As the list is updated, e-mail alerts are received to inform us that the list has been updated. These e-mail alerts are available by subscribing to a number of different sources. The preferred method is to receive an alert via the Compliance Online website. A subscription to this general compliance alert service may be obtained by visiting:



To ensure that there is no risk of missing an updated list, the OFAC website should be accessed on the 1st of each month to ensure that the most recent date of the SDN list on-line is the same as the most recently downloaded file. A recurring task should be built so this is not overlooked.

Downloading the SDN List

The SDN List is available on the Department of the Treasury website: ofac, and is in a compressed format.

1. Access the website, and scroll down to the “Information on Specially Designated Nationals and Blocked Persons” section of this page and then select Delimited Files. Note the date the list was last updated.

2. When prompted to access the file, select "save this program to disk", select “OK”.

a. Save the file in the “OFAC” folder on the shared directory, in the Extraction subfolder

b. Exit the website when the download is complete

3. Access the OFAC folder via Windows Explorer, and select the file “t11sdall (1)”.

a. This is a DOS based program that will run automatically and decompress the file into a readable format. The word “Finished” will appear after several seconds, when the decompression is complete.

4. In Explorer, open the “sdnlist” file. When prompted, open the file using the Wordpad program.

5. On the main Menu Bar, select Edit - Select All -Copy

6. Open a new MS Word document, and Paste the copied text into the Word document

7. Save the Word document in the OFAC folder, in the current year. Use the date of the SDN list as the file name.

8. In Explorer, delete all files in the Extraction Activities subdirectory.

9. Send an email, with the list attached, to the Bank Operations officers or other designated individual at each institution.

If The Wire Transfer Department Has an OFAC “HIT” …

The various procedures files for processing Funds Transfers instruct the Fedline Operator to do the following if a customer attempts to wire funds to, or receive funds from, an entity that appears on the SDN list:

1. Notify Central Operations Management - they may chose to contact legal counsel

2. E-Mail the Bank Operations Officer.

3. Call the OFAC Compliance Hotline at 1-800-540-OFAC (6322).

The Fedline Operator will work under the direction of Central Operations Management, Legal Counsel, and the OFAC Compliance contact to ensure that all necessary actions are completed. This could result in many things, including blocking the funds, rejecting the funds, or allowing the transaction to take place. (For a definition of common OFAC terms, see Appendix A to these procedures)

Misc. OFAC Transaction Requirements – Handling Blocked Funds

31 CFR, Chapter 5, Part 500.205 – This section of the regulation states that funds must be maintained in the form of a Time Deposit account (Certificate of Deposit). The CD Term must be the shortest term offered by the bank, and may not exceed 6 months. In addition, if the bank offers multiple short-term products, the class code that pays the highest interest rate must be chosen.

Either Central Operations Management or the Operations Specialist will work with the Operations Officer at the affected bank to set up this account. Because Central Operations does not have the ITI Security Clearance required to open new accounts, Central Operations will place the funds in GL 10995. The banker that opens the CD will then process a debit to GL 10995 and credit the new account.

A new portfolio must be opened for each entity, and a new account must be opened for each attempted transaction. In addition, appropriate informational addenda’s must be placed on the account and port level, and the appropriate transaction restriction code must be placed on the account. Central Operations will work with the Bank Operations Officer to ensure that these additional steps are taken (either by C.Ops or by the bank).

OFAC Reporting Requirements

Immediate Reporting

Within 10 days of blocking or rejecting funds, a report must be filed with the Treasury. Our involvement in immediate reporting will revolve only around wire transfers. This type of reporting is discussed in part 501.603 & 501.604 of the regulation. There is no standard reporting form provided by the treasury department, but a standardized form has been created (See appendix) The reporting will be printed on Central Operations letterhead.

1. Make a photocopy of the incoming wire transfer from the Fedline Terminal (if applicable).

2. Complete the report with the following information:

• Originator Name

• Beneficiary Name

• Address of both Beneficiary and Originator, if available

• Originating Financial Institution (if applicable)

• The account number of the CD that was established to retain the funds

• The Term and Rate associated with the CD that was established to retain the funds

• The amount of the transaction

3. Complete a section on the “report” to indicate the name of the Central Operations Manager and telephone number.

4. Photocopy all documents, and file in the appropriate location.

5. Fax the report and supporting documents if directed to do so by the OFAC Compliance contact (when the violation was originally identified). Otherwise, send the report via certified mail (with return receipt) to:

Office of Foreign Assets Control

Compliance Programs Division

US Treasury Department

1500 Pennsylvania Avenue NW – Annex

Washington, DC 20220

Annual Reporting

On an annual basis, any Financial Institution that has been involved in blocking or rejecting funds, must file a report with the Treasury. Our involvement in the annual reporting will revolve not only around wire transfers, but will include any funds blocked by the bank throughout the previous year.

Annual reporting is discussed in part 501.603 & 501.604 of the regulation. There is a standard reporting form provided by the treasury department, and is available on the OFAC Website – Form TDF 90-22.50.

The annual report must include property that has being held as of 6/30 of the current year. The reporting period runs from 7/1 to 6/30. Annual reports are due on September 30th.

1. Send an e-mail to each bank’s operations officer, requesting information on any blocked or rejected transactions.

2. Pull the OFAC file for each bank from the centralized location.

3. Access the OFAC Website at .

4. Go to the General Info Page, and select the Annual Report Of Blocked Property Icon.

5. Print a copy of the TD F 90-22. 50 report from the website. Make as many copies are needed to report for each affected bank. It is not necessary to file a report for a bank that has not blocked, frozen, or rejected funds during the reporting period.

6. Following the instructions on the report, complete all fields on both pages of the report for each bank. Include information on all funds reported by the banks and Central Operations.

7. Make a photocopy of the completed reports, and file in the centralized location.

8. Mail the completed reports to:

Office of Foreign Assets Control

Compliance Programs Division

US Treasury Department

1500 Pennsylvania Avenue NW – Annex

Washington, DC 20220

BIBLIOGRAPHY:

31CFR, Chapter 5, Part 500 and 501, as amended from time to time

“Foreign Assets Control Regulations for the Financial Community” - Dept of Treas., 10/3/01

ABA Bank Compliance Newsletter, Mar-Apr 1996

ABA Bank Compliance Newsletter, Nov-Dec 1998

RELATED C.OPS PROCEDURES:

Commercial Wire Transfer

Wire Transfer Processing

APPENDIX A: Glossary of common OFAC terms

A—Blocking

Also called “freezing,” this is a form of controlling assets under U.S.

jurisdiction. While title to blocked property remains with the designated

country or national, the exercise of the powers and privileges normally

associated with ownership is prohibited without authorization from

OFAC. Blocking immediately imposes an across-the-board prohibition

against transfers or transactions of any kind with regard to the property.

B—Blocked Account

An account with respect to which payments, transfers, withdrawals or

other dealings may not be made except as licensed by OFAC or otherwise

authorized by the Treasury Department. Debits are prohibited, however,

credits are authorized.

C—General License

A regulatory provision authorizing certain transactions without the filing

of an application with OFAC. Its terms are listed in the appropriate

Regulations. The concept is similar in meaning to that employed by the

U.S. Department of Commerce. Transactions consistent with normal

banking practice are frequently permitted by general license. For

questions about general licenses, contact OFAC at 202/622-2520

D—Specially Designated Nationals and Blocked Persons

Individuals and entities which are owned or controlled by, or acting for or

on behalf of, the Governments of target countries or are associated with

international narcotics trafficking or terrorism. These individuals and

entities are listed on the Treasury Department’s Specially Designated

Nationals and Blocked Persons list so that persons subject to the

jurisdiction of the United States will know that they are prohibited from

dealing with them and that they must block all property within their

possession or control in which these individuals and entities have an

interest.

E—Property

Anything of value. Examples of property include: money, checks, drafts,

debts, obligations, notes, warehouse receipts, bills of sale, evidences of

title, negotiable instruments, trade acceptance, contracts, and anything

else real, personal, or mixed, tangible or intangible, “or interest or

interests therein, present, future, or contingent.” Practically everything

that banks do every day involves “property” within the meaning of the

regulations. Likewise, “property interest” is defined as any interest

whatsoever, direct or indirect.

F—Census

Comprehensive statistical survey of blocked assets conducted from time

to time by OFAC. Response is mandated by law. The information

obtained from the survey is of vital importance to the U.S. Government

for foreign policy planning purposes, to assist Treasury in the

preservation of blocked assets, and to enhance their value for U.S.

claimants, including financial institutions.

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