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OFAC requirements for screening Beneficiaries, Instant Payments, and ACH Transactions

Here are answers to some questions that have recently been raised by regulated entities with regards to OFAC compliance requirements.

Are banks and other regulated entities required to screen account beneficiaries?

YES. As stated by OFAC, “it is prudent for financial institutions to screen account beneficiaries upon account opening, while updating account information, when performing periodic screening and, most definitely, upon disbursing funds.”

In other words, your KYC onboarding and ongoing screening, along with AML screening of transactions’ beneficiaries must always be performed.

Is Sanctions Screening required for Instant Payments?

YES. OFAC demands banks to “ensure their sanctions compliance controls and related technology solutions remain commensurate with the sanctions risks presented by instant payment systems.”

OFAC requires instant payment providers to adhere to all relevant sanction screening regulations, clarifying that the AML rules for instant payments are no different than those for other transaction types.

It highlights the requirement for a risk-based approach, making it clear that the financial institution’s management commitment is one of the most important essential components of compliance. In other words, the institution’s management is directly responsible for any pitfalls in the adherence to the respective regulations.

Is Sanctions Screening required for ACH?

YES. According to OFAC, ACH transactions require sanctions screening as any other payment or transaction.

FFIEC emphasizes the demand for screening ACH transactions, referring to the expanded overview section, “Automated Clearing House Transactions,” page 216 and pointing out that “OFAC has clarified its interpretation of the application of OFAC’s rules for domestic and cross-border ACH transactions and provided more detailed guidance on international ACH transactions.”

FFIEC also specifies that Due diligence for inbound or outbound ACH transactions “may include screening the parties to a transaction, as well as reviewing the details of the payment field information for an indication of a sanctions violation, investigating the resulting hits, if any, and ultimately blocking or rejecting the transaction, as appropriate.”

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