What is the OFAC Risk Matrix?

The Office of Foreign Assets Control (OFAC) is a part of the United States Department of Treasury. The OFAC provides oversight for sanctions on international trade and economic activity. Additionally, the OFAC regulates sanction activity against named terrorist groups and narcotics trafficking rings. International funds transferred from government agencies are also subject to OFAC oversight in some cases.

To create sanction policy and enforce existing sanctions as well as determine whether there is risk involved in completing financial transactions, the Office of Foreign Assets Control risk management team must utilize several tools to calculate risk. Some of the items reviewed by the Office of Foreign Assets Control risk management team may include the history of an entity receiving funds, and whether or not the entity is registered with its local government as a corporation, charity, government organization, or private individual.

What’s the Point of OFAC Risk Matrix Operations?

A risk matrix is used to determine whether the receiver of funds is considered high-risk, medium-risk, or low-risk. If funds are sent to a high-risk entity, the potential exists for the United States government to become culpable in whatever actions were taken using those funds. As a result, evaluating any recipient of government funds is very important.

Additionally, because sanction activity can be complex depending on the actors and the situation, determining risk may play a role in determining which funds to monitor. A group that has been sanctioned may need to have its financial transactions regulated in terms of funds coming into or going out of the United States to or from a foreign nation. The risk matrix helps to determine the level of scrutiny required for each group.

Can Risk Level Be Changed?

If an entity is considered high-risk, it may be possible to lower the risk level by taking certain steps. In many cases, these are procedural and regulatory in nature, but each case is different. Some recipients may need to take specific actions to become in compliance while others may need to make drastic, sweeping changes to their organizations.

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