OFAC Recordkeeping Changes May Lead to Higher Enforcement Risks, Law Firm Says
Sanctions compliance departments should consider updating their bookkeeping policies and practices to account for an upcoming expansion to U.S. sanctions-related record-keeping rules, which could lead to higher enforcement risks, Freshfields Bruckhaus said in a client alert last week.
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In July guidance published by the Office of Foreign Assets Control, the agency said it plans to soon publish an interim final rule to extend its record-keeping requirements from five to 10 years to match a similar expansion of the U.S. statute of limitations for sanctions violations that was signed into law earlier this year (see 2407220022).
The firm said compliance teams should consider changing their own record-keeping rules as soon as possible to get ahead of the upcoming rule. “Taking proactive steps now to prepare for this change -- including taking stock of the potential associated costs and practical burdens -- can help companies be ready for the new recordkeeping rules once they become effective,” Freshfields said.
The law firm also said compliance teams should update their “look-back periods” to cover the previous 10 years instead of five, especially for mergers and acquisitions, capital markets transactions, financings and other commercial agreements. They should also be aware of the “potential for increased enforcement risk” that an extended statute of limitations could bring.
Companies may also want to take into account the new 10-year limit when deciding whether to voluntarily disclose a possible sanctions violation, especially for violations “that may have been close to expiring under the five-year” statute of limitations. The firm said U.S. enforcement agencies “now have increased runway to investigate these apparent sanctions violations,” and companies “could face more enforcement actions and larger penalties.”