OFAC Risk Factors
Cross-border relationships pose unique risksbecause they create situations in which a U.S. financial institution will be handling funds from a foreign financial institution whose customers are not transparent to the US financial institution. In addition, securities firms need to be concerned about all of their affiliates, such as banks, insurance companies, investment advisors, or other broker dealers.

To help firms in adopting effective risk based programs, OFAC has provided a list if risk factors that may warrant heightened scrutiny before any transaction is effected:

• High number of international transactions, cross border transactions, or investments in a foreign investment fund or a foreign exchange;

• Presence of overseas branches or multiple correspondent accounts with foreign financial institutions;

• A large fluctuating client base across a number of foreign jurisdictions involving a large number of security transactions;

• Customers located in or having accounts in high-risk jurisdictions, such as countries found to be of “primary money laundering concern” pursuant to Section 311 of the PATRIOT ACT or are inadequately AML regulated;

• Accounts for senior political or government officials of a foreign government;

• Accounts of closely held corporations;

• Accounts of unregistered or unregulated investment vehicles;

• Accounts maintained at an off-shore account;

• Foreign broker dealers who are not subject to OFAC regulations;

• Foreign Broker dealers who lack information regarding the beneficial ownership of their client’s securities accounts;

• Foreign companies that issue shares in bearer form;

• Hedge funds and high net worth institutional accounts where there is a lack of transparency regarding the beneficial owners of their securities accounts;

• Omnibus accounts where the underlying investor identities are concealed;

• Cross border trades executed for unregulated investment vehicles (e.g., hedge funds, private equity funds, and other private pools of capital)

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