As part of its series on information for industry groups, the Office of Foreign Assets Control of the US Department of the Treasury has published a Compliance Communique entitled “Sanctions Compliance Guidance for Instant Payment Systems.” The Communique aims to guide financial institutions toward sanctions compliance best practices in an age of high velocity instant payments, both international and domestic. Broadly, OFAC recommends that financial institutions adopt a risk-based approach to keep pace with the innovations in the instant payment sector, and that developers of instant payment systems incorporate sanctions compliance considerations at the inception.
In the Communique, OFAC reiterated the five essential components of compliance:
• Commitment on the part of management;
• Risk assessment;
• Internal controls;
• Testing and auditing, and;
• Training.
In terms of varying degrees of risk level, OFAC recommends that each institution assess its own risk, but offered general guidance to flag higher-risk transactions. For example, transactions involving solely domestic banks within the United States would generally require less scrutiny than transactions involving foreign institutions. The nature and value of payments should be considered – for example, transactions that follow a pattern of consistent, vetted transactions may run a lower risk of sanctions violations than one-off or high value payments involving unfamiliar parties. OFAC encourages the use of up-to-date sanctions compliance technologies, and reminds industry players of the availability of OFAC’s Compliance Hotline, should questions arise.