The conflict in Ukraine has shown a spotlight on the OFAC sanctions regime and the need for nonprofits to understand their obligations when sending foreign aid abroad. Nonprofits sending foreign aid abroad or operating in crisis zones must understand that certain countries, regimes, businesses, and individuals are subject to sanctions administered by the Department of Treasury’s Office of Foreign Assets Control (“OFAC”).
OFAC sanctions restrict domestic companies from transacting with certain foreign parties that the United States has determined pose a threat to national security or our foreign or economic policy. Engaging in transactions that violate these sanctions may result in fines, blocked assets, and even imprisonment.
Charitable Giving Abroad
Charitable giving in foreign countries can be complex. Nonprofits should understand that transacting overseas takes planning and forethought. Nonprofits must comply with OFAC regulations when sending aid to sanctioned countries. Specifically, nonprofits may be required to obtain a license to supply foreign assistance legally.
Obtaining OFAC License
While obtaining an OFAC license is relatively straightforward, it does take time. When applying for a license, nonprofits will need to provide specific details regarding the aid’s amount, type, and purpose. The nonprofit will need to determine where the support will be sent, adequate transportation, how it will be disseminated once it arrives, and establish a plan to keep the aid out of the hands of sanctioned parties.
Intended parties must receive aid and other donations. Otherwise, the nonprofit may be penalized. OFAC does acknowledge the difficulties in certain countries to eliminate all benefits to sanctioned parties. However, nonprofits can still be punished if aid benefits sanctioned parties, even nominally.
To combat the risk of aid falling into the wrong hands, OFAC developed a risk matrix to help nonprofits determine the level of risk associated with various forms of giving. Generally, the more precisely the aid is allocated, the less chance of having such aid benefit sanctioned parties. Prudent nonprofits will conduct due diligence and develop a detailed plan for sending aid before applying for an OFAC license, and such prudence ensures fast approval and smooth implementation.
We recommend nonprofits visit OFAC’s website to see country-specific sanctions and regulations and consult OFAC’s risk matrix. We also recommend nonprofits develop a Foreign Aid Policy designed to ensure compliance with OFAC regulations. Failure to comply with OFAC regulations can result in severe consequences for nonprofits, even if their intentions are in the right place. Due diligence, proactive planning, and appropriate legal consultation will help protect nonprofits from inadvertently violating OFAC sanctions regulations.
This post was written by Kyler Mejia, a third-year law student with Arizona State University law school and legal extern with Caritas Law Group, P.C.
Caritas Law Group, P.C. advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations nationwide as well as donors with regard to major gifts. To schedule a consultation, call 602-456-0071 or email us through our contact form.