CUNA Comment Letter

Disclosure of OFAC Penalties

July 19, 2002

Chief of Records
Office of Foreign Assets Control
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220
ATTN: Request for Comments

Re: Proposed Rule - Disclosure of OFAC Penalties

Dear Sir or Madam:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the proposed rule regarding the public disclosure of penalties that are imposed by the Office of Foreign Assets Control (OFAC), which appeared in the Federal Register on June 19, 2002. CUNA represents more than 90 percent of our nation's 10,500 state and federal credit unions.

Summary of CUNA's Position

Under the proposed rule, OFAC will disclose to the public certain information about civil penalties that are imposed, as well as informal settlements. This information will be disclosed periodically, which will be at least on a quarterly basis.

CUNA recognizes that the goal of the proposed rule is to provide more information to the public in order to promote greater awareness of its enforcement activities and to encourage greater compliance with the OFAC sanctions program. Although we generally support efforts in favor of transparent government and disclosure of violations of law, we believe that disclosing information about OFAC penalties may unfairly impact some of the entities that are listed.

The burdens of complying with the OFAC sanctions program are already quite substantial, which includes significant monitoring of an ever-changing list of terrorist or money laundering suspects, as well as very steep penalties for noncompliance. Although most large financial institutions use specialized software to filter or track transactions for purposes of OFAC compliance, such software is prohibitively expensive for many small credit unions.

Public disclosure of OFAC violations would add even more to this substantial burden for any credit union that may have inadvertently violated an OFAC requirement. We have always been concerned that the ever-increasing complexity of the OFAC sanctions programs raises the risk that entities may mistakenly violate the requirements. Publicly disclosing such violations would aggravate this potential problem by ruining the reputation of those entities that would be affected.

For credit unions, the consequences would be severe. If a credit union inadvertently violated an OFAC reporting requirement, the public disclosure of such a violation may cause members to lose confidence in their credit union. Severe liquidity problems could result if a number of credit union members were to terminate their membership or otherwise withdraw funds from their accounts. This would not only impact the credit union, but the members would be adversely impacted by the resulting fear that they may experience and the inconvenience of altering their financial accounts.

Such public disclosure may actually exacerbate the current situation resulting from the crisis of confidence that now exists in our economy as a result of a number of accounting scandals affecting a growing number of large corporations. Although we certainly support disclosing the actions of guilty parties, we believe that the harm caused to credit unions and their members by disclosing inadvertent OFAC violations outweighs the possible benefit that the rest of the public would receive from such disclosures, which we believe would be insignificant. Also, the penalties that these credit unions would have to bear will be substantial, regardless of whether they are publicly disclosed, and these penalties will provide sufficient incentive for credit unions to avoid future, inadvertent violations.

If OFAC proceeds with this rule regarding the public disclosure of penalties, we suggest that OFAC provide the affected parties a period of time, such as ninety days or more, so that they can correct the violation in order to avoid public disclosure. If the disclosure would still have to be made public, this period of time would also provide these entities with a reasonable opportunity to advise their members or customers of the circumstances of the situation and to persuade them not to take actions to alter their relationships with the institution.

Thank you for the opportunity to comment on the proposed rule regarding the public disclosure of OFAC penalties. If you or other staff have questions about our comments, please give Associate General Counsel Mary Dunn or me a call at 1-800-356-9655.


Jeffrey Bloch
Assistant General Counsel