Earlier today one of the largest databases of blocked persons on the Internet, World Check, issued a press release stating that they are so effective that they were able to identify and place a warning to users of their service regarding a certain Chechen terrorist 5 years before The United States Department of the Treasury Office of Foreign Assets Control (“OFAC”) designated that individual as a Specially Designated Global Terrorist (“SDGT”).

While this might make it seem like World Check is an incredibly effective service, what it proposes to do is in actuality quite dangerous. Essentially what World Check is doing is administering sanctions against individuals and entities on their own by placing them in their database; in some cases before those parties have every been designated pursuant to a sanctions program. The World Check database is essentially a list of individuals and entities that parties should be wary of transacting with. Individuals and entities check this database to ensure they are not transacting with a party they are barred by law from transacting with. In other words, they are scaring off parties who might engage in transactions with such listed individuals before those entities are actually designated as a blocked person pursuant to the economic sanctions program of some nation or international governing body.

As an attorney practicing in this field, I have seen the damage done to people who have been designated either erroneously or based on scant evidence of wrongdoing. I think World Check’s proactive approach sends the wrong signals, in that it prematurely condemns individuals and entities to sanction like consequences before those parties’ actually have sanctions imposed against them by a government or organization with the legal authority to do so. What effectively is occurring therefore, is the imposition of a legal judgment upon individuals and entities by a private sector company with no legal authority to do so.

I’m all for being careful and abiding by the requirements of sanctions programs; however, in this case, I believe what World Check is doing could cause problems for some truly innocent people. Although online database services such as those provided by World Check can be a valuable tool, parties should remember that such databases might not accurately reflect what individuals and entities they should avoid transacting with.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC litigation. If you have any questions please contact him at 202-280-6370 at 202-351-6161 or ferrari@ferrari-legal.com.