AML and OFAC

I can certainly sympathize with the owners of the Bin & Barrel described in the San Jose Mercury News story "Meet your local antiterror agent".

Under federal rules still being fine-tuned, she discovered, the Bin and Barrel -- like thousands of other businesses -- must have a written plan for foiling money-laundering terrorists. It also must have a "compliance officer'' to ensure the plan is heeded, train its employees to spot shady transactions and regularly audit its own performance.

All thanks to the USA Patriot Act, Section 352 (PDF), 31 USC 5318(h):

(h) Anti-Money Laundering Programs.

(1) In general. - In order to guard against money laundering through financial institutions, each financial institution shall establish anti-money laundering programs, including, at a minimum -

(A) the development of internal policies, procedures, and controls;

(B) the designation of a compliance officer;

(C) an ongoing employee training program; and

(D) an independent audit function to test programs.

But, as the story says "that's not all"

While not widely known, the Bin and Barrel and every other U.S. business must steer clear of people on the government's 192-page list of "specially designated nationals,'' which has more than 5,000 names and is updated frequently. Otherwise, business people could face huge fines and a long stay in prison.

***

On Sept. 24 of that year, President Bush signed an executive order barring business dealings with anyone on the specially designated list, which includes the names and aliases of suspected terrorists, drug kingpins and their associates. Those failing to comply can be fined $10 million and jailed up to 10 years.

The list of blocked persons is maintained by the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"). Keeping up to the list can be burdensom and costly. The article claims that the cost of software to match names against the list can cost between $1,000 and $100,000. And it's not foolproof. Let's hope the license agreement has a good indemnification clause, from the licensee's perspective : )