What is required if a borrower is found on the OFAC watch list?

If a borrower is found on the Office of Foreign Assets Control (OFAC) watch list, the lender is required to report the situation to OFAC and seek further instructions. This protocol is in place to comply with federal regulations that prohibit financial institutions from engaging in transactions with individuals or entities that are on the OFAC list due to concerns related to national security or foreign policy.

The process involves the lender confirming the borrower's identity and determining if there is a match with the OFAC entries. Upon a confirmed match, the lender must take action and report the findings to OFAC. Seeking further instructions is crucial, as OFAC may provide specific guidance on how to proceed, which could vary depending on the circumstances surrounding the listing.

This requirement aims to ensure that lenders do not facilitate any transactions that could inadvertently support unlawful activities, thereby protecting both the lender and the broader financial system from regulatory violations.