OFAC Due Diligence Questions

Summary

This template due diligence questions may be used to perform due diligence interviews regarding a company’s compliance with sanctions programs established by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). This template includes practical guidance, drafting notes, and optional clauses. OFAC oversees and enforces economic sanctions against certain countries, regions, entities, and individuals. Significant direct penalties can be imposed for violations of the OFAC sanctions, including on a strict-liability basis (i.e., regardless of fault or intent). Further, parties participating in a securities offering, particularly the issuer and the underwriters in a public offering, bear additional risk that undisclosed sanctions or violations could lead to shareholder litigation and liability or securities laws violations. Additional OFAC due diligence is typically performed if an issuer is a non-U.S. company and the other offering participants (such as the investment banks acting as underwriters) are U.S.-based or have U.S.-based operations. You should also consider performing additional OFAC due diligence if the issuer operates in an industry that is considered high-risk for dealing with sanctioned countries or individuals, such as banking, export/import, or exploration of natural resources. This template is meant to be a starting point for questions. Counsel should adapt the questions to fit the specifics of the company, including addressing any issues that have been flagged during the legal and other due diligence processes, as well as any issues relevant to the company’s industry. To ensure that the participants are well prepared, you may wish to distribute the list of questions ahead of the meeting. The purpose of a due diligence interview is primarily to identify potential issues for further investigation. Each sanctions program is unique in scope and includes its own guidance regarding prohibited activities; counsel specializing in OFAC issues may need to be consulted for complex issues. These questions do not address compliance with sanctions programs promulgated by supra-national organizations or other countries, such as the European Union and its members. If compliance with such programs is a concern, you should consult with the appropriate local counsel. For a full listing of related due diligence for securities offerings content, see Due Diligence for Securities Offerings Resource Kit. For more information on OFAC due diligence, see OFAC Due Diligence in Securities Offerings. For more information on due diligence interviews, see Due Diligence Interviews.