OFAC Regulations

Protect Your Ministry When Sending Funds Internationally

Take steps to comply with OFAC regulations

If your organization engages in ministry around the world, you likely use international financial transfers to support your foreign operations. These transactions often provide critical support for international ministry activities and the people or entities who carry them out. But they can be more complex – and carry greater risk – than domestic financial transactions.

Under U.S. law, it’s critical for ministries to develop financial ‘due diligence’ procedures to reflect the extra steps and additional obligations accompanying foreign transfers. This process should include examining all foreign-based individuals or entities who will receive funds from you. Before executing any transaction, ministries should be able to answer the following question affirmatively: “Am I certain that I can legally transfer funds to this recipient?”

Before sending funds internationally, check with OFAC

All U.S.-based organizations, including ministries, are legally prohibited from engaging in financial transactions that directly or indirectly benefit individuals, entities, or countries currently sanctioned by the Department of Treasury’s Office of Foreign Assets Control (“OFAC”). OFAC adds people and entities to various sanctions lists, including the Specially Designated Nationals and Blocked Persons list (“SDN List”). In some cases, OFAC also blocks some or all activity in a country unless an organization obtains a specific license covering its work.

Ministries are expected to comply with OFAC regulations for all foreign transactions, no matter the purpose. Even payments related to kidnappings or ransomware attacks are subject to OFAC restrictions. If the Treasury Department discovered your ministry’s transaction benefited a sanctioned individual or entity, you might be subject to significant fines and penalties – even if you were unaware of violating the law. (This legal concept is known as “strict liability.”) That’s why it’s vital to confirm your recipient is not affiliated with anyone on an OFAC sanctions list.

Simple procedures can promote compliance

Despite the risks, many ministries fail to consider OFAC requirements when putting foreign transfers in place. Thankfully, it’s relatively easy to get started. Your organization can institute a few simple steps to help promote compliance with OFAC regulations, protect your ministry from fines and penalties, and optimize your financial stewardship practices.

Document your foreign financial transfers. Proper documentation of each transaction is important. Keep track of details such as the date, amount, recipient, account information, and purpose of all transfers.

Collect information about your recipient.

Obtain as much data as possible about the recipient, including the individuals and the entity involved. Collect the names and addresses of key employees who will handle the funds and any ultimate recipients (e.g., local workers receiving some of the funds as a stipend).
One way to do this is to develop an annual grant application and grant agreement for international recipients. Collecting this data annually can help your ministry keep its data up to date. The agreement can cover compliance-related items, such as ensuring the funds are spent as described in the application, arranging to return unspent funds, and confirming the recipients’ commitment to comply with OFAC and related regulations by not distributing funds to anyone on the SDN list. (See below for a sample grant agreement from the ECFA.)
The Treasury Department’s Risk Matrix for the Charitable Sector (pdf) can help you evaluate the level of risk associated with disbursing funds to a recipient.

Search the names and addresses you collected against the OFAC sanctions lists.

OFAC’s Sanctions List Search allows users to search its SDN List and other sanctions lists for free.
OFAC recommends these “due diligence” steps to help analyze the validity of any potential hits. If there is ultimately a match, you can call the OFAC hotline at 1-800-540-6322 for guidance.
Keep in mind that OFAC updates its SDN list frequently. Some organizations may run a search only at the beginning of a project or agreement. However, this may not account for the updated data your ministry collects – or the names of people or entities OFAC adds to the list. It may be a good idea to evaluate how often your ministry should run the data you’ve collected against the sanctions lists.
Note: The free OFAC search may be tedious for organizations with a high volume of transactions. While Brotherhood Mutual does not endorse any particular product, a paid sanctions screening tool like WatchDOG Elite or LexisNexis could be helpful for frequent searches.

Make sure the funds are used for their intended purposes. If possible, you may want to consider taking follow-up actions to confirm the funds you transferred were correctly spent. For example, if the transfer supported the construction of a well, can you obtain photos to verify the funds were used to advance this project toward completion?

An opportunity to demonstrate good stewardship

Although the above steps can reduce your ministry’s risk of violating OFAC regulations, there’s a bigger picture involved: good stewardship. By protecting your ministry from fines and ensuring your ministry’s funds are used for their intended purposes, your employees and donors will know the funds that have been entrusted to you are being used wisely.

For more information on funding international ministry operations, check out these resources:

Related Resource

Posted February 18, 2022

The information provided in this article is intended to be helpful, but it does not constitute legal advice and is not a substitute for the advice from a licensed attorney in your area. We strongly encourage you to regularly consult with a local attorney as part of your risk management program.