I am no history buff, so I cringed when my 11-year-old came home from school last week and said he had to study the Chinese dynasties. At that moment I wished we lived closer to my 94-year-old grandfather, who is a retired history professor. You see, my husband and I split homework duties – I cover math, and he takes on spelling/grammar/vocabulary. I bit the bullet, reviewed my kid’s notes on each dynasty’s artistic and military achievements, religious beliefs, and lifestyles during that time period …. yawn….
The little history lesson with my son gave me the idea to share a brief history lesson about the Office of Foreign Assets Control. According to the U.S. Department of the Treasury website, it has been dealing with sanctions dating back to before the War of 1812. Around the start of World War II, the Office of Foreign Funds Control was established and then succeeded by OFAC in 1950 when President Truman blocked Chinese and North Korean assets after China entered the Korean War.
Today, OFAC continues to be controlled by the treasury department. It oversees and enforces economic sanctions against groups of individuals, such as terrorists, drug dealers and money launderers. The list includes not only individuals but also companies, charitable organizations and even countries. They are known as Specially Designated Nationals, and OFAC is responsible for maintaining a current list of them.
In past articles, I have discussed the obligations a dealership has to comply with OFAC regulations. Though the regulation does not specify dealerships as required parties, the requirement states that before anyone does business with a consumer, they have an obligation to check the consumer against the list. I have also stressed that OFAC needs to be checked on all types of transactions, including cash, wholesale, retail and lease. Dealerships have several resources they can utilize to conduct OFAC checks, including software providers, the OFAC website or using the analog approach of downloading the list and manually searching through the names. That list is also provided on the OFAC website.
OFAC regulations are murky, so from a conservative perspective, if anyone is involved in the deal, even if they are not on the contract, you must run an OFAC check. If you have a third party contributing to the deal, you need to run an OFAC. Anyone who contributes to the down payment or is listed as an owner to a trade is considered third party to the deal. Common examples are a business, spouse or parent that are third parties but not part of the sale. As part of the dealership’s compliance process, it should train its sales and F&I managers to confirm OFAC clearance on all parties involved.
There are two additional OFAC search talking points I want to expand upon, as I believe they are necessary to cover: conducting searches on hyphenated names or surnames, and searches on a name suffix.
Hyphenated last names have become ever so popular, especially with married women who take on their married names but also prefer to maintain their maiden names. When OFAC searches are conducted, it does an exact name search as opposed to a fuzzy search. If you have a consumer with a hyphenated last name, for example, JuJu Smith-Schuster, your search must include both names. Same goes for double surnames, most often seen in consumers of Hispanic descent who adopt two surnames. Once again, the dealer must run both surnames as part of its OFAC search.
The final point of discussion when running OFAC is a name suffix. A name suffix is the abbreviation that follows a consumer’s last name, for example, John Smith III. If the dealer runs a search on John Smith but fails to include the III, it is returning results for the consumer’s grandfather, not the consumer.
I realize the chances of getting a legit OFAC hit are slim, but failure to comply with the regulation can result in unwanted consequences. If the dealership fails to check any party against the OFAC list, it is subject to criminal and civil fines, as well as possible imprisonment, depending on the severity of the violation. The government takes the OFAC requirements seriously, as should you.
Penelope Bell is an associate at Automotive Compliance Education.
