CHAPTER 4: CREDIT MANAGEMENT
Note that OFAC restrictions apply to all transactions made in U.S. dollars (USD) regardless of who makes them. Moreover, the offense is not only committed in relation to U.S. dollar transactions. A U.S. person breaches OFAC by dealing with an OFAC-sanctioned party in any currency. Payments made in U.S. dollars to sanctioned parties are subject to being blocked by banking institutions, and information regarding the payment must be reported to OFAC by those institutions. Thus, OFAC sanctions can affect organizations in other countries. The reach of the U.S. sanction laws has caused conflict with other nations, with some having enacted legislation to protect their businesses from interference by U.S. (or other international) legal and regulatory agencies. SPECIALLY DESIGNATED NATIONALS (SDN) AND BLOCKED PERSONS LIST OFAC consolidates, publishes, and regularly updates a list of individuals, entities, and companies owned or controlled by targeted countries as well as those that are not country-specific. These individuals and companies are known as Specially Designated Nationals (SDNs). Many of the names on the list sound harmless and some are located within the United States. The SDN and Blocked Persons list is available on the OFAC website for download, either in its entirety or sorted by program or country. The website also provides the ability to look up or search for individuals or companies to determine if they are included on the list. You may also sign up to receive e-mail updates to the list. FOREIGN TERRORIST ORGANIZATIONS (FTOs) The U.S. Secretary of State, in consultation with the Attorney General and the Secretary of the Treasury, designates and lists foreign Terrorist Organizations (FTOs). The designations are valid for two years. At that point, there is a review by the Secretary of State to determine if the organization is to be re-designated. Designation serves to:
Support U.S. government efforts to curb terrorism financing and encourage other nations to do the same;
Heighten public awareness and knowledge of terrorist organizations; and Stigmatize and isolate designated terrorist organizations internationally.
It is illegal for a person in the U.S., or subject to the jurisdiction of the U.S., to provide funds or other material support to any organization on the FTO list. Banks and other financial institutions must freeze funds of designated FTOs and their agents and report these actions to OFAC. For several years, the FTO list has been part of the OFAC SDN list. In considering all the ways to analyze a potential customer, remember that a credit manager can’t do it all. It is important to choose what is right for the company, keeping cycle time in mind. If credit analysis takes too long, the company may lose the customer to a competitor, or—if it is a seasonal buy—it will be too late for this year’s purchase. A company will often adopt a deeper credit analysis for higher credit lines and a simpler process for low dollars. However, this first step in reviewing status regarding sanctioned parties must be done for all customers—it is not optional.
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THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
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