International Compliance

International Compliance: Your Passport to Global Banking 🌍

The Story of the Global Money Watchers

Imagine you’re a lifeguard at the world’s biggest swimming pool. Your job? Make sure everyone swimming is supposed to be there, nobody is drowning, and no one is breaking the rules. That’s exactly what International Compliance does for banks around the world!

Banks are like busy airports where money travels instead of people. And just like airports have security checkpoints, banks have compliance rules to make sure money goes where it should—and stays away from bad actors.

🎯 What You’ll Learn

1. FATCA Compliance – Finding American money hiding abroad
2. Sanctions Compliance – The “no-fly list” for money
3. OFAC Screening – The security checkpoint for every transaction

1. FATCA Compliance: The American Money Detective 🔍

What Is FATCA?

FATCA stands for Foreign Account Tax Compliance Act.

Think of it like this: Your mom tells you to check if your toys are at grandma’s house. The U.S. government does the same thing—it asks banks worldwide: “Hey, do any Americans keep their money with you?”

Why Does This Exist?

Some Americans were hiding money in foreign banks to avoid paying taxes. That’s like hiding your allowance under your friend’s bed so your parents don’t know about it. Not fair, right?

How It Works

graph TD
    A["American Opens Account Abroad"] --> B["Foreign Bank Asks: Are You American?"]
    B --> C{Customer Says Yes}
    C --> D["Bank Reports to IRS"]
    B --> E{Customer Says No}
    E --> F["Bank Still Checks Documents"]
    F --> G{U.S. Signs Found?}
    G --> D

The Simple Rules

Real-Life Example

Maria’s Story: Maria was born in Texas but moved to Germany. She opens a bank account in Berlin. The German bank asks: “Were you born in the U.S.?” Maria says yes. Now the bank must report her account balance to the U.S. tax authority (IRS) every year.

Key FATCA Signs (Indicia)

Banks look for these clues that someone might be American:

• 🇺🇸 U.S. birthplace
• 📞 U.S. phone number
• 📍 U.S. address
• 💸 Standing instructions to transfer to U.S.
• 📝 Power of attorney to U.S. person

2. Sanctions Compliance: The Global “No-Fly List” for Money ✋

What Are Sanctions?

Imagine you have a list of kids who aren’t allowed in your treehouse because they broke the rules. Sanctions are like that—but for countries, companies, and people who broke big international rules.

When a country or person is sanctioned, banks cannot send them money. Period.

Who Creates Sanctions?

graph TD
    A["🇺🇸 United States"] --> E["Sanctions Lists"]
    B["🇪🇺 European Union"] --> E
    C["🇬🇧 United Kingdom"] --> E
    D["🇺🇳 United Nations"] --> E
    E --> F["Banks Must Follow"]

Types of Sanctions

Real-Life Example

The Frozen Account: A businessman named Viktor is added to the sanctions list for helping illegal arms deals. The next day, his bank account with $2 million is frozen. He can’t withdraw a single dollar. The bank did its job!

What Banks Must Do

1. Check every customer against sanctions lists
2. Screen every transaction before it goes through
3. Freeze assets if a match is found
4. Report to authorities immediately

3. OFAC Screening: The Security Checkpoint 🛂

What Is OFAC?

OFAC = Office of Foreign Assets Control

Think of OFAC as the security guard at the bank’s door. Before any money moves, OFAC screening checks: “Is this person or company on our watch list?”

OFAC is part of the U.S. Treasury Department. It manages America’s sanctions programs and keeps the official “bad guy” lists.

The Main OFAC Lists

graph TD
    A["OFAC Lists"] --> B["SDN List"]
    A --> C["SSI List"]
    A --> D["Country Programs"]
    B --> E["Specially Designated Nationals - Blocked Persons"]
    C --> F["Sectoral Sanctions Identifications"]
    D --> G["Cuba, Iran, North Korea, etc."]

How OFAC Screening Works

Every time you:

• Open a bank account
• Send a wire transfer
• Receive money from abroad
• Make a large payment

…the bank’s computer checks your name against OFAC’s lists in milliseconds.

The Screening Process

Real-Life Example

The Wire Transfer: Tom wants to send $5,000 to his business partner Ahmed in Dubai. The bank’s system runs Ahmed’s name through OFAC screening. The system finds a person with a similar name on the SDN list!

A compliance officer reviews the case. They check Ahmed’s passport, address, and date of birth. It’s a different Ahmed—just the same name. The wire transfer is approved. This is called a “false positive” and happens often!

Why “Fuzzy Matching” Matters

Bad actors try to hide by:

• Changing spelling (Al-Qaeda → Al Qaeda → Alqaeda)
• Using nicknames
• Mixing up name order

Good screening catches these tricks!

🎬 Putting It All Together

Imagine money as a traveler flying around the world:

💡 Key Takeaways

FATCA = Tax Transparency

• U.S. law requiring foreign banks to report American account holders
• Banks look for “U.S. indicia” (signs of being American)
• Non-compliance means 30% withholding tax

Sanctions = Financial Punishment

• Restrictions on doing business with certain countries/people
• Comes from governments and international bodies
• Banks must freeze sanctioned assets

OFAC Screening = The Final Check

• Every transaction screened against watch lists
• Catches terrorists, drug dealers, corrupt officials
• Uses “fuzzy matching” to catch name variations

🌟 Why This Matters

Without these compliance measures:

• Tax evaders would hide money overseas
• Terrorists could fund attacks
• Corrupt leaders could steal billions

You’re not just learning rules—you’re learning how the global financial system stays safe.

Banks are the gatekeepers. And now, you understand how they guard the gates! 🏛️

🔑 Quick Memory Tricks

You’ve just learned how banks protect the world’s financial system. That’s no small thing. Feel confident—you’ve mastered international compliance basics! 🎓