From Pymnts · PYMNTS · · 1m 20s
OFAC Warning Shows CFOs Sanctions Risk Can Hide in Payment Route
OFAC alert reveals payment routes can become blocked by sanctions even when suppliers appear clean.
In brief
OFAC alert reveals payment routes can become blocked by sanctions even when suppliers appear clean. CFOs face payment disruptions from sanctions via correspondent banks without knowing the route's risk. Originally reported by Pymnts.
OFAC Alert
Treasury's Office of Foreign Assets Control warned financial institutions that continuing to transact with sanctioned entities could lead to being targeted without advance notification.
“at any time without advance notification”
Payment Route Risk
Sanctions can disrupt payments through correspondent banks even when the supplier appears clean and the transaction itself isn't illegal.
“a payment that suddenly stops working”
Correspondent Banking
Correspondent banking allows regional banks to access foreign markets through intermediary institutions without maintaining accounts at every bank.
“a regional bank without direct access to a particular currency or market can maintain a relationship with another financial institution that does”
OFAC Actions
OFAC recently severed U.S. correspondent banking access for Banque Misr UAE, designated Golden Global Bank and subsidiaries, and targeted VTB Bank for Iranian sanctions evasion.
“severed U.S. correspondent banking access for Banque Misr UAE”
CFO Challenge
CFOs need visibility into payment routes, not just recipients, to manage sanctions risk as financial networks become more vulnerable.
“CFOs need visibility into the route, not just the recipient”
Payment Resilience
Real-time bank-risk data and alternative payment corridors are becoming essential for CFOs to maintain liquidity during sanctions enforcement.
“real-time bank-risk data, richer payment information and alternative corridors are becoming essential”
SMB Impact
57% of U.S. small and medium businesses buy goods from overseas suppliers, with 43% prioritizing faster payment processing as their top improvement.
“57% of small and medium-sized businesses in the United States buy goods or inputs from overseas suppliers”
The one thing
CFOs face payment disruptions from sanctions via correspondent banks without knowing the route's risk.
