OFAC Publishes New Sanctions Compliance Guidance for Instant Payment Systems

On September 30, 2022, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) published its Sanctions Compliance Guidance for Instant Payment Systems in conjunction with a settlement agreement between the agency and Tango Card, Inc. The guidance reaffirms that financial institutions should take a risk-based approach to manage sanctions risks and encourages deploying innovative sanctions compliance technologies to address identified risks. 

A risk-based approach to sanctions compliance

In line with the FATF’s recommendation, OFAC calls on banks to implement a risk-based approach to sanctions compliance by developing, employing and routinely updating a sanctions compliance program. 

As not all financial products or instant payment systems present the same sanctions risks, OFAC highlights that there is no “one-size-fits-all” approach to managing sanctions risks. Instead, a financial institution should assess its associated risk according to its size, geographic location, and specific products and financial services.

OFAC also highlights the importance of complying with FinCEN’s Customer Due Diligence (CDD) rule by noting that the nature of a payment may be relevant in assessing the relative sanctions risks. Under the CDD rule, “covered financial institutions” must establish and verify the identities of their customers and understand the purpose and nature of customer relationships and conduct risk assessments to build customer risk profiles. 

Implementing innovative compliance solutions

Where appropriate, artificial intelligence (AI) tools and other emerging compliance solutions are recommended by OFAC due to their potential to enhance sanctions screening functions and reduce false positives. Innovative tools include those that leverage information-sharing mechanisms between financial institutions and real-time AML data generation for sanctions and watchlist screening. 

Based on a firm’s risk appetite, OFAC advises using innovative tools and solutions to manage sanctions risks that could arise in instant payments. 

The Tango Card settlement

Between 2016 and 2021, Washington-based e-gift and prepaid card provider Tango Card Inc. violated multiple US sanctions programs due to deficient geolocation identification processes. During this time, Tango Card transmitted 27,720 merchant gift cards and promotional debit cards, totaling $386,828.65, to individuals with email or IP addresses associated with Cuba, Syria, Iran, North Korea, and the Crimea region of Ukraine. Tango Card’s voluntary disclosure of its sanctions violations and cooperation with OFAC is reflected in the settlement amount of $116,048.60. 

Tango Card’s settlement reinforces the significance of using relevant geographic information as part of a risk-based sanctions compliance program. Tango Card’s reporting process also highlights the importance of voluntarily self-disclosing apparent violations and providing thorough cooperation with OFAC during an investigation.

A Spotlight on Financial Crime

Stay on top of regional trends and novel criminal techniques so you can protect your business from financial crime.

Download Our Free Global Compliance Report