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Check prospective buyers against the SDN list to ensure full OFAC compliance.
If someone were to ask you what you think is most important when owning an auto dealership, what would you say? Building a solid, effective sales team? An impressive, well-priced inventory? Great financing options?
Those would all be legitimate, understandable answers — but they would also be wrong.
The most important thing to think about when owning an auto dealership is compliance. There are many different rules and regulations that affect the auto industry, and if your dealership isn’t keeping up and prioritizing them, you won’t be in business much longer.
One type of regulation auto dealerships need to worry about is the Office of Foreign Assets Control (OFAC) compliance. The OFAC is a government agency, and it maintains a list of names and aliases of individuals, organizations, and companies that the U.S. government has classified as potentially dangerous and a potential threat to national security.
The basics of OFAC compliance for dealerships
OFAC compliance has been a “must” for auto dealerships since the USA Patriot Act was signed into law on October 26, 2001. Since then, it has been required that auto dealers (and other businesses conducting financial transactions with consumers) screen any potential buyer before conducting a sale.
OFAC compliance checks are usually performed at the same time you conduct a credit check. You do not need to obtain authorization from the customer before running the search. You don’t even have to tell them. It should just be something you automatically do.
The customer’s name needs to be compared against the Specially Designated Nationals and Blocked Persons (SDN) list, which is a public list maintained by the U.S. Treasury Department and OFAC. The list, according to OFAC, is “of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific.” They also note that “their assets are blocked and U.S. persons are generally prohibited from dealing with them.”
How to ensure OFAC compliance if a buyer is on the SDN list
Most credit bureaus have adopted new measures to ensure OFAC compliance and use screening software to determine if an applicant is on the SDN list (which means you likely do not have to manually comb through the list of 6,000+ names). But what happens if the report comes back and the person is flagged as possibly being on the SDN list?
Compare the name of the person to what is found on the list. If that matches, look at all of the other information you have in front of you like address and date of birth — do those things match as well? If you’re not sure if you have an exact match, call the OFAC hotline at 1-800-540-6322. You don’t want to make a mistake, because if you fail to identify a person on the SDN list and you do business with them, you could end up in big trouble.
Depending on the program, criminal penalties for willful violations can include fines ranging up to $20 million and imprisonment of up to 30 years. Civil penalties for violations of the Trading With the Enemy Act can be up to $65,000 for each violation.
Total OFAC compliance is completely possible
OFAC compliance can feel overwhelming, but if you keep the basic principles in mind, your dealership should have no problems. Remember, no sale is worth breaking the law — make sure your dealership is fully compliant and your team will be in an ideal position to make sales and thrive.