OFAC FAQ (Current) # 45 - Additional Questions from Financial Institutions

Date issued: Sep. 10 2002

Last substantive commentary amendment:
Apr. 02 2024

TURBOFAC Commentary (230 words)

Notes:

1) Technically, a U.S. person bank providing a cashier’s check to an SDN would be a violation of the law on a strict liability basis. In practice, OFAC appears to not enforce the sanctions rules unless, in its view, the alleged violator had a "reason to know" of the facts or circumstances leading to the violation. However, the "reason to know" threshold turns out to not serve as much of a safe harbor since OFAC generally finds that a person had "reason to know" of a violation any time it fails to exercise the sort of due diligence expected of OFAC given the facts and circumstances of the case.

This FAQ is notable for OFAC's implied recognition of this fact, implying that the extra-legal "reason to know" standard essentially determines what constitutes a violation in a technically strict liability setting. See General Note on the terms "knowingly," "should have known" and "reason to know" in the Primary Sanctions, Secondary Sanctions and Derivative Designation Contexts (System Ed. Note).

As for the specific transactions at issue, OFAC expects screening of purchasers and payees of cashier’s checks, so the "reason to know" standard would apply in the same way it applies in typical screening cases. From 2006 through at least 12/2020, neither cashier's checks nor mortgage lending appear to have been the subject of an enforcement action against a bank.