Violating U.S. economic sanctions that are imposed against America’s enemies and other international provocateurs can lead to serious legal and financial penalties. These economic sanctions are enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) and serve as among the most crucial of the import/export laws that protect U.S. national security and foreign interests.
The penalties for violating OFAC-enforced sanction laws are not limited to criminal liability and civil fines. Your company can also suffer extremely bad publicity that will be difficult to overcome in the years ahead. Hiring skilled OFAC compliance attorneys from the national law firm Oberheiden P.C. is one of the best ways to insulate your company from the legal threats that come with an allegation of an OFAC violation.
6 Types of OFAC Violations and the Legal Penalties That Come With Them in 2023
The precise penalties that a company can face for violating economic sanctions imposed by OFAC will depend on the type of violation. There are six types of violations, based on which law or regulation that OFAC is using to pursue a case. They are the:
- Trading With the Enemy Act of 1917 (50 U.S.C. §§ 4301 – 4341)
- International Emergency Economic Powers Act of 1977 (50 U.S.C. §§ 1701 – 1709)
- Antiterrorism and Effective Death Penalty Act of 1996 (Public Law No. 104-132)
- Foreign Narcotics Kingpin Designation Act (21 U.S.C. §§ 1901 – 1908)
- Clean Diamond Trade Act (19 U.S.C. §§ 3901 – 3913)
- Recordkeeping provisions set out in OFAC’s Economic Sanctions Enforcement Guidelines (31 C.F.R. Part 501 Appendix A)
Each law carries its own set of penalties. Some carry criminal liability in certain cases. The civil monetary penalties that OFAC can impose for a violation are subject to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Section 701 of Public Law No. 114–74), which increases the amount based on annual inflation according to a set formula. This means that the civil penalties that OFAC can impose will vary by year.
Because the inflation rate has been so high in the last year, the civil penalties for an OFAC violation rose 7.745 percent from 2022 to 2023.
Here are the resulting penalties for a violation of an OFAC-enforced U.S. sanctions law in 2023, according to 88 Federal Register 2229 (Jan. 13, 2023). These penalties go into effect on January 13, 2023, and apply to all civil penalties assessed by OFAC after that date, even if the associated violation of U.S. sanction law occurred before then.
Dr. Nick Oberheiden
Founder
Attorney-at-Law
Lynette S. Byrd
Former DOJ Trial Attorney
Partner
Brian J. Kuester
Former U.S. Attorney
Amanda Marshall
Former U.S. Attorney
Local Counsel
Joe Brown
Former U.S. Attorney
Local Counsel
John W. Sellers
Former Senior DOJ Trial Attorney
Linda Julin McNamara
Federal Appeals Attorney
Aaron L. Wiley
Former DOJ attorney
Local Counsel
Roger Bach
Former Special Agent (DOJ)
Chris J. Quick
Former Special Agent (FBI & IRS-CI)
Michael S. Koslow
Former Supervisory Special Agent (DOD-OIG)
Ray Yuen
Former Supervisory Special Agent (FBI)
The Trading With the Enemy Act
The Trading With the Enemy Act prohibits American nationals and domestic companies from engaging in business with foreign nationals of countries with which the United States has declared war against. It was passed in 1917, soon after the U.S. declared war on Germany in World War I. It gives the President of the United States the authority to restrict trade with America’s enemies, but is limited to wartime.
In 2023, the maximum civil monetary penalty that companies or individuals can face for each violation of the Trading With the Enemy Act is $105,083. This is up from $97,529 in 2022.
Note that this amount is for each violation. Many courses of business involve multiple transactions. In this way, the penalties for violating the Trading With the Enemy Act can increase very quickly into the millions of dollars.
The International Emergency Economic Powers Act
The International Emergency Economic Powers Act drastically expanded the President’s ability to regulate international commerce by allowing the President to do so outside times of war in a national emergency. Such a national emergency can be declared in response to a threat to the U.S. from abroad.
The penalties for violating the International Emergency Economic Powers Act are laid out in 31 C.F.R. § 510.701.
In 2023, the maximum civil monetary penalties for a violation of the International Emergency Economic Powers Act rose to the greater of either:
- $356,579, which is up from $330,947 in 2022, or
- Twice the amount of the transaction.
Wilful violations of, or wilful attempts to violate, the International Emergency Economic Powers Act can be prosecuted as a crime. Convictions carry up to a million dollars in fines and/or, if the defendant is a person and not a company, federal imprisonment of up to 20 years.
The Antiterrorism and Effective Death Penalty Act
The Antiterrorism and Effective Death Penalty Act was passed to deter terrorism after the Bombing of the World Trade Center and the Oklahoma City Bombing. While the law focused on habeas corpus law, it also included a provision (18 U.S.C. § 2339B) that OFAC could enforce against parties that funded terrorists or against financial institutions that knowingly failed to freeze the accounts of terrorists.
Knowingly funding terrorists or terrorist organizations carries up to 20 years in prison or, if someone dies in connection with the violation, up to life in prison.
Financial institutions can face a civil penalty for knowingly failing to comply with the Antiterrorism and Effective Death Penalty Act’s requirements. In 2023, that civil penalty is $94,127, or twice the amount that the financial institution was required to freeze if that amount is higher.
The Foreign Narcotics Kingpin Designation Act
The Foreign Narcotics Kingpin Designation Act, also known as the Kingpin Act, gives the President of the United States the authority to impose economic sanctions on those involved in the international drug trade and narcotics trafficking.
In 2023, civil penalties for trading with a party that has been sanctioned under the Kingpin Act are up to $1,771,754.
Wilful violations of the law are criminal acts under 21 U.S.C. § 1906(a). They carry up to 10 years in prison and, if the defendant is a corporate entity, up to $10 million in fines. Individuals in corporate entities that knowingly participate in a violation of the Kingpin Act face up to $5 million in fines and up to 30 years in prison.
The Clean Diamond Trade Act
Under the Clean Diamond Trade Act, all diamonds imported or exported by the U.S. must be certified. The Act was passed to regulate the blood diamond trade in Africa.
In 2023, any violation, or attempted violation, of the sanctions related to the Clean Diamond Trade Act carry up to $16,108 in fines. Wilful violations or attempted violations carry up to 10 years in prison and fines of up to $50,000 under 19 U.S.C. § 3907.
OFAC’s Recordkeeping Provisions
Finally, OFAC enforces numerous recordkeeping regulations that aim to prevent companies, particularly financial institutions, from hiding evidence of violations of economic sanctions. In 2023, violations of these recordkeeping obligations carry the following financial penalties:
| Violation | Maximum Civil Monetary Penalty |
| Failing to furnish information under 31 C.F.R. § 501.602 | $27,520 |
| Failing to furnish information under 31 C.F.R. § 501.602 when OFAC has reason to believe the violating transaction involves more than $500,000 | $68,801 |
| Filing a required report late, but within 30 days of its due date | $3,439 |
| Filing a required report late, more than 30 days after its due date | $6,881 |
| Filing a required report late, if it relates to blocked assets | $1,377 for every 30 days it is overdue, up to five years |
| Failing to adequately maintain records | $68,928 |
4 Frequently Asked Questions About OFAC Penalties and the Legal Services of Oberheiden P.C.’s OFAC Lawyers
Why are There so Many Different Types of OFAC Violations?
There are so many different types of OFAC violations because OFAC is tasked with enforcing a wide variety of federal laws. Each of those laws comes with its own set of penalties.
Are There Any Other Types of Setbacks That I Can Face?
Yes. In addition to civil monetary penalties and imprisonment, individuals and companies can also face significant blowback from the public if their alleged violations get out, as well as having the assets at issue get blocked and seized by OFAC.
The bad publicity that companies often face from an OFAC investigation can be severe and can cripple a corporation. Getting tied to any of America’s enemies can taint even the cleanest reputation for honesty and good business. Overcoming that blemish can take time and lots of money and effort in public relations work.
What Sets Oberheiden P.C. Apart from Other OFAC Firms?
There are numerous OFAC defense and compliance providers out there. Oberheiden P.C. is different for several reasons. Chief among them are the facts that we have both compliance and defense teams, and that both are staffed entirely with experienced professionals who will actually be performing the work on your case.
First, Oberheiden P.C. has compliance professionals and OFAC sanctions defense lawyers under the same roof. They work hand-in-hand to craft better compliance protocols for our clients and create stronger defense strategies for those who are already facing an investigation.
Second, all of our personnel has numerous years of experience in their fields. Many of them only came to Oberheiden P.C. after a long and illustrious career in some of the most powerful federal agencies around, including the Department of Justice (DOJ) and even OFAC. And unlike at other firms, we do not employ paralegals or junior associates to whom we could delegate the work in your case. All of the work product comes from the experienced professionals that drew you to our firm.
Why Doesn’t Oberheiden P.C. Call Itself the Best OFAC Sanctions Law Firm in the U.S.?
We think our client’s testimonials say this sort of thing far better than we ever could.
The OFAC Compliance and Defense Team at Oberheiden P.C.
Avoiding these penalties requires strict compliance with OFAC laws and strong advocacy if you or your company is facing an OFAC investigation over an alleged violation of one.
The OFAC sanctions lawyers at Oberheiden P.C. have built strong compliance protocols for companies across the U.S. and have represented them during enforcement actions undertaken by the agency.
Contact us online or call our law office’s national hotline at (888) 680-1745 to get started at your company today.
