OFAC warns CFOs that sanctions risk can lurk in payment routes
On Monday (Oct. 5), the Treasury Department’s Office of Foreign Assets Control warned foreign financial institutions that continuing to transact with sanctioned entities could expose them to sanctions at any time without notice. The warning came as global supply chain pressures reached a four‑month high, according to the Federal Reserve Bank of New York’s GSCPI released Tuesday (Oct. 6).
OFAC pointed to recent actions against banks that gave sanctioned actors such as Iran access to correspondent banking and the international financial system. Specifically, the agency cited its August move to cut U.S. correspondent banking access for Banque Misr UAE, its September designation of Turkey‑based Golden Global Bank and its subsidiaries, and its action against Russia’s VTB Bank for Iranian sanctions evasion. Correspondent banking lets a regional bank without direct currency access move money through a partner institution, a link that can become blocked if the intermediary is sanctioned.
“The term ‘cross‑border’ signifies that a payment traverses different legal entities, jurisdictions, regulatory frameworks, sanction regimes,” Emanuela Saccarola, Citi’s head of cross-border payments and services said.
Traditional sanctions controls are heavily counterparty-centric: Who are we paying? Who owns the business? Is the company or its beneficial owner sanctioned? Is the destination permitted. The implication is bigger than freezing the assets of a sanctioned company.
What we know
Monday (Oct. 5) alert
Tuesday (Oct. 6) GSCPI released
global supply chain pressures hitting a four-month high
August move to sever U.S. correspondent banking access for Banque Misr UAE
September designation of Turkey-based Golden Global Bank and its subsidiaries