As 2023 commences, the United States remains arguably the most significant international influencer with respect to efforts to curb money laundering and terrorism financing activities. In order to better propel their interests in this regard, economic sanctions have become a potent tool in deterring criminal activity both domestically and abroad. The United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) both administers and enforces these sanctions across numerous target groups utilizing Specially Designated Nationals (SDN) and Consolidated Sanction Lists (CSL), respectively. These lists include the names of individuals and companies in countries targeted by U.S. sanctions and effectively bar U.S. financial institutions and consumers from dealing with these entities at risk of enforcement actions. While civil penalties can vary by the involved sanctions program, the fines for these violations can be substantial. In many cases, individual civil and criminal penalties can exceed tens to hundreds of million of dollars each. All told, OFAC reached a cumulative total of nearly $43 million collected for 16 penalties, settlements and findings of sanctions violations cases in 2022, while reaching the multi-billion dollar plateau for cumulative penalties over the past decade alone.
These figures again appear to be on the upswing, as the Office of Foreign Assets Control recently announced a sharp increase in civil monetary penalties (CMP’s) that fall within its jurisdiction for the 2023 calendar year. In total, these penalties are set to increase by 7.7% from those levied in 2022, with these increases officially coming in to effect on January 13th. The increase in monetary penalties comes as part of adjustments required under the Federal Civil Penalties Act of 1990, as amended by the Debt Collection Improvement Act (DCIA) of 1996 and amended once more by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.2The exact increase in these annual penalty percentages therefore must account for increases in national cost-of-living adjustments, which is measured via the Consumer-Price-Index (CPI). As global inflation rates have hit near-record numbers over the past year, the CPI for all urban consumers has subsequently by 7.7 percent from October 2021 to October 2022 – the timeframe by which OFAC’s assessment is quantified.
As this date of implementation has now passed, any penalties issued by OFAC will have the additional 7.7 percent applied to them, and will also include those whose associated violation occurred prior to Jan. 13, 2023. Under OFAC’s final rule issued earlier this month, the adjusted penalties apply to CMP’s that are assessed after January 13, 2023, as long as the violation occurred after November 2, 2015 (i.e., the date of the enactment of the aforementioned 2015 Act). All told, OFAC imposes “civil monetary penalties” (CMPs) pursuant to the penalty authority in five statutes: the Trading with the Enemy Act (“TWEA”), the International Emergency Economic Powers Act (“IEEPA”), the Foreign Narcotics Kingpin Designation Act (“FNKDA”), the Antiterrorism and Effective Death Penalty Act (“AEDPA”), and the Clean Diamond Trade Act (“CDTA”).3
The increases for maximum civil monetary penalties in 2023 can be found below:
|Statute||Previous Maximum CMP Amount (per violation)||New Maximum CMP Amount Effective Jan. 13, 2023 (per violation)|
|Trading with the Enemy Act (TWEA)||$97,529||$105,083|
|International Emergency Economic Powers Act (IEEPA)||The greater of $330,947 or twice the amount of the underlying transaction||$356,579 or twice the amount of the underlying transaction|
|Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA)||The greater of $87,361 or twice the amount of which a financial institution was required to retain possession or control||The greater of $94,127 or twice the amount of which a financial institution was required to retain possession or control|
|Foreign Narcotics Kingpin Designation Act (FNKDA)||$1,644,396||$1,771,754|
|Clean Diamond Trade Act (CDTA)||$14,950||$16,108|
Table 2 — Maximum CMP Amounts for Recordkeeping CMPs
|Violation||Previous Maximum CMP Amount||New Maximum CMP Amount Effective Jan. 13, 2023|
|Failure to furnish information pursuant to 31 CFR 501.602, irrespective of whether any other violation is alleged||$25,542||$27,520|
|Failure to furnish information pursuant to 31 CFR 501.602, where OFAC has reason to believe that the apparent violation(s) involves a transaction(s) valued at greater than $500,000, irrespective of whether any other violation is alleged||$63,855||$68,801|
|Late filing of a required report, whether set forth in regulations or in a specific license, if filed within the first 30 days after the report is due||$3,192||$3,439|
|Late filing of a required report, whether set forth in regulations or in a specific license, if filed more than 30 days after the report is due||$6,386||$6,881|
|Late filing of a required report, whether set forth in regulations or in a specific license, if the report relates to blocked assets, an additional CMP for every 30 days that the report is overdue, up to five years||$1,278||$1,377|
|Failure to maintain records in conformance with the requirements of OFAC’s regulations or of a specific license||$63,973||$68,928|
With these financial adjustments made annually, and updates to SDN and Blocked Persons lists made fairly regularly, it is paramount that financial institutions stay up-to-date with both their record-keeping and screening processes to avoid falling victim to avoidable penalties. OFAC strongly encourages organizations within U.S. jurisdictions to have a risk-based sanctions compliance program (SCP) in place. While each SCP will vary based on its size and services offered, OFAC has stated that an effective framework includes five essential components: (1) management commitment; (2) risk assessment; (3) internal controls; (4) testing and auditing; and (5) training.1 Global RADAR provides comprehensive, artificial intelligence-backed sanctions screening and AML monitoring solutions created to improve the accuracy and efficiency of what is arguably the most time consuming and complex aspect of anti-money laundering compliance, all while cutting costs. As updated compliance and risk profile assessments are constantly evolving, Global RADAR can eliminate the guesswork while keeping your business one step ahead with respect to complying with today’s staunch sanctions guidelines.
- “A Framework for OFAC Compliance Commitments.” Department of the Treasury.
- Oleynik, Ronald A. et al. “OFAC Increases Civil Monetary Penalties for 2023: Insights.” Holland & Knight, 23 Jan. 2023.
- “Inflation Adjustment of Civil Monetary Penalties A Rule by the Foreign Assets Control Office on 01/13/2023.” Federal Register, 13 Jan. 2023.