How Do I Check Account Names Against The OFAC List?

By Patricia A. Murphy

The Office of Foreign Assets Control (OFAC for short) wants banks to more carefully scrutinize customers. OFAC is a Treasury Department office that enforces economic and trade sanctions against foreign countries (like Iraq and Cuba) and agents of those countries (known as Specially Designated Nationals, or SDNs), terrorist organizations and international narcotics traffickers.

OFAC publishes lists of sanctioned individuals and organizations, and expects financial institutions and other businesses to keep up-to-date on those lists, which can include thousands of names. Faced with a new customer included on an OFAC list, an existing customer whose name is added to the OFAC list, or a transaction initiated by a customer to a sanctioned entity, a financial institution must "freeze" those transactions and notify OFAC of the activity within 10 days, or risk hefty fines.

The difficulty is keeping up with the ever-changing nature of the OFAC list, and integrating compliance into various bank operations. Many banks already integrate OFAC compliance with wire transfer operations, and several vendors have been able to help on this count by incorporating OFAC compliance procedures into wire transfer software. But one area that could leave banks exposed is new accounts. Although vendors say they're working on the problem, software that automatically checks individuals against the OFAC list as part of the account-opening process is scarce. Bridger Systems, Inc., Bozeman, MT, has developed a package that supports integration of OFAC tracking into any Windows-based program, such as new accounts software. The catch: it's not something most banks can do in-house; it's better left to the vendor of the base software, explains Dave Belote, product manager.

For a small bank, though, Belote says it's possible to use the company's base products - OFAC Inspector and OFAC Analyzer to check out new customers. Bridger offers on-line trials of its software(http://link-usa.com/ofac), which some banks have been known to use to check individuals in lieu of installing the software.

Logica, Inc., Lexington, MA (http://www.logica.com), and Information Technology Solutions, Inc., New York (http://www.its-us.com), also offer OFAC compliance software. Logica has just upgraded its HotScan software with an OFAC Editor that ensures a bank has all the latest information on blocked accounts and individuals. The ITS OFAC Monitor checks all transactions, including new account openings, says Gareth Davis. Both the Logica and ITS systems are geared toward large banks. With thousands of names on the OFAC list, there are bound to be some false matches. For example, one name on the OFAC list is John Abbott - reportedly a front man for Libyan nationals, and a common American name. If you don't want to have to turn away every John Abbott who walks into your bank, you'll need to build an exemption list into the OFAC compliance software you install, based on your client parameters - names, addresses, etc.

It takes some work, but seems worthwhile for avoiding the wrath of OFAC.

(Note: Telephones: Bridger (406) 586-0513, Logica, Inc. (617) 476-8000, ITS, Inc. (212) 986-5710. Patti Murphy is President of Takoma Group, Inc., which specializes in editorial and consulting services related to payments and banking technologies.

Copyright © 1997 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 7, No. 12, 12/97