OFAC Compliance for Auto Dealers

Yes, Auto Dealers Must Comply with OFAC

Many auto dealers are surprised to learn that OFAC regulations apply to them. Unlike banks, auto dealers are not examined by federal banking regulators for OFAC compliance. But that does not mean the rules do not apply. OFAC's regulations cover all US persons and businesses, and that includes auto dealerships. If you sell a vehicle to a sanctioned party, you can face serious penalties regardless of whether you knew the buyer was on a sanctions list.

Cash Reporting and OFAC

Auto dealers have a specific obligation under the Bank Secrecy Act: any cash transaction over $10,000 must be reported to FinCEN on a Form 8300. This includes not just a single payment, but related transactions that add up to more than $10,000 within a 12-month period.

While Form 8300 reporting is a BSA requirement rather than an OFAC requirement, the two are related. If you are accepting large cash payments, you should be screening the buyer against OFAC lists. Cash-intensive transactions carry higher risk for sanctions violations and money laundering.

When to Screen

As an auto dealer, you should screen at these points:

• Before completing a sale: Screen the buyer's name against the SDN List before finalizing any vehicle purchase.
• Cash transactions: Any transaction involving cash over $10,000 should trigger both a Form 8300 filing and an OFAC screening.
• Financing: If you are arranging financing through a third party, the lender will typically perform their own screening. But if you offer in-house financing, the screening responsibility is yours.
• Lease agreements: Lessees should be screened at the start of the lease.

Customer Due Diligence

While auto dealers do not have the same formal CDD requirements as banks, it is good practice to verify your customer's identity before completing a sale. Collect a valid government-issued ID and keep a copy on file. This helps you perform accurate OFAC screening and provides documentation if questions arise later.

Pay attention to situations that seem unusual: buyers who insist on paying large amounts in cash, buyers who seem evasive about their identity, or buyers purchasing vehicles on behalf of unnamed third parties. These can be red flags for both sanctions evasion and money laundering.

Common Mistakes Auto Dealers Make

• Not screening at all. This is the most common mistake. Many dealers simply do not know they are supposed to screen, or they assume their bank handles it.
• Only screening cash transactions. OFAC compliance is not limited to cash deals. You should screen all buyers regardless of payment method.
• No documentation. Even if you do screen, failing to keep records of your screening activity leaves you vulnerable in an audit or investigation.
• No written policy. You should have a written OFAC compliance policy, even if it is brief. It shows regulators that you take compliance seriously.

Practical Steps for Dealers

1. Designate someone at the dealership as the OFAC compliance point person.
2. Write a short OFAC policy that describes when and how you screen.
3. Use screening software to check buyers against the SDN List. OFACScreen makes this quick and easy, even for dealers with no compliance background.
4. Keep records of every screening you perform.
5. Train your sales staff on the basics. They do not need to be compliance experts, but they should know that OFAC screening is part of the sales process.

OFAC compliance for auto dealers is not as burdensome as it might sound. A few minutes of screening per transaction is a small price compared to the potential penalties for a violation.