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Banks Increasingly 'Not Touching' Transactions With Sanctions Nexus, Former OFAC Director Says

Multinational banks are more often choosing not to authorize payments involving sanctioned jurisdictions or people, even if those payments are authorized by a general license or not subject to restrictions, said Richard Newcomb, a DLA Piper lawyer and former director for the Office of Foreign Assets Control. “Even if authorized, banks increasingly will not process a transaction involving or touching a sanctioned country or do business with anyone that has unlawfully done business with a sanctioned person or country,” Newcomb said.

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Newcomb, speaking this week during a sanctions enforcement and compliance conference hosted by the Wilson Center, said companies can try to assure banks that the transactions are authorized through “enhanced due diligence.” This may include a comprehensive effort to “check all sources” for information about whether a party is sanctioned and keeping a record of those efforts.

He also said compliance departments should know their customer as well as their customer’s owners, directors and managers, and “know your customers’ customers and their customers, on down the supply chain direct to the delivery of goods.” He also stressed the importance of paying attention to red flags and stopping “whenever you see one, and investigate. Don't let yourself be willfully blind.”

Banks for years have hesitated to rely on general licenses issued by OFAC and long have urged the agency to provide more assurances that they won’t face penalties for humanitarian-related transactions in sanctioned regions, including through comfort letters (see 2109020064).