755. Is a U.S. or third-country financial institution required to independently verify that the underlying transactions giving rise to U.S. dollar monetary instruments presented for processing and payment pursuant to § 515.584(g) are authorized?
No. A financial institution receiving U.S. dollar monetary instruments for processing and payment directly or indirectly (in the case of a U.S. banking institution) may rely on the institution having presented such monetary instruments as confirmation that the underlying transactions are authorized, exempt, or otherwise not prohibited, unless the financial institution knows or has reason to know that the transaction is not authorized, exempt, or otherwise not prohibited. For a complete description of what this general license authorizes and the restrictions that apply, see 31 CFR § 515.584(g). [11-08-2017]
1) Compare main index FAQ # 116, dealing with diligence standards applicable to intermediary financial institutions.
Here OFAC applies something akin to the principle underlying the practice with respect to intermediary financial institutions, but in the context of straight-through processing where a U.S. bank is the recipient of funds not destined for some other bank. OFAC's reference to "reason to know" here is, as always, a function of its diligence expectations given the circumstance, but the rest of the FAQ makes clear that those diligence expectations do not require affirmative investigation into the nature of the underlying transaction. A "reason to know" in this case would be, for example, a payment message indicating that the payment to a U.S. person for oilfield services provided in Cuba. That transaction would have been prohibited by the CACR, rather than "authorized, exempt, or otherwise not prohibited."
2) See section 3(ii) of 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) for general comments on the “may rely” / “may reasonably rely” statement contained herein. FAQ # 753 and FAQ # 755 are significant insofar as they appear to link OFAC's standard "may rely" language to a lack of an expectation that U.S. persons "independently verify" the statements on which they are relying.