Who Are You Really Paying?

The Lesson of OFAC: Sometimes Names Alone
Can be Deceiving

The elevated visibility of U.S. Homeland Security has created new interest in identifying the funding of terrorist-linked individuals, targeted foreign countries and other payment risks. As a result, regulations enforced by the U.S. Treasury Office of Foreign Assets Control (OFAC) or established as part of legislation such as Sarbanes-Oxley and the Patriot Act have increased business' exposure to risk of sizeable penalties for improper payments.

This risk, however, is not limited to U.S.-based firms. OFAC guidelines pertain to any organization disbursing payments from within the U.S., thereby impacting businesses on a global basis. Companies caught making payments to entities listed on OFAC's Specially Designated Nationals (SDN) list — even inadvertently — can face significant fines.

Take for instance two recent examples — one a well-known international express freight carrier making payment to a business in Kosovo, violating U.S. trade sanctions; and another, one of the nation's largest and most reputable investment fund managers operating an Iranian client account. While largely unintentional, these infractions raise the question: Do you really know who you are paying?

Technology Provides a Response
Software solutions are now available to assist organizations in monitoring and identifying payments to entities on OFAC's SDN list before they can occur — as well as mitigate security risks related to other types of payment fraud.

Among its other functions, the WebSeries® Payments Risk Management module offers powerful options for OFAC compliance. This solution enables financial managers and security officers to automatically check the names of payees against the evolving SDN list. WebSeries' extraordinary name variation capabilities — beyond simple direct name match — allow users to generate scores of potential name variations for a single individual on the list.

To ensure maximum security against payment fraud, however, enterprises must couple practical technology solutions such as WebSeries with a few best practices. These include monitoring all financial transactions performed by or through the enterprise to detect those that involve any entity or person subject to OFAC regulations. The definition of financial transactions broadly encompasses any type of disbursement (check, ACH, FedWire, SWIFT) or any collection (lockbox receipts via check, ACH, FedWire, international drafts, etc).

In addition to payments and collections, protecting your business against OFAC violations should include monitoring other types of financial transactions for OFAC compliance as well, including deposit accounts, loans, line of credit, safety deposit boxes, currency exchanges, cashed or deposited checks, money orders, cashier checks, loan payments and trust accounts.

The names of all parties to a transaction should be checked against the list of names of individuals, entities, geographical locations or countries that have been identified by OFAC. This includes beneficiaries, collateral owners, guarantors and co-signers, and receiving and sending parties.

For more information on Bottomline's WebSeries Payments Risk Management module and other ways to mitigate risk, read Five Ways to Prevent Payment Fraud, download a brochure, or contact your local Bottomline solutions representative.