To maintain compliance with the Office of Foreign Assets Control sanctions programs, businesses and organizations are required to report certain transactions to OFAC. Reporting blocked or rejected transactions must be done in writing or electronically from the United States Department of the Treasury website. Additionally, those conducting international financial transactions must provide an Annual Report of Blocked Property to OFAC. Reporting forms are available here on the US Department of the Treasury website.
OFAC reporting and recordkeeping requirements are specified in the Federal Register in 31 C.F.R. Part 501—Reporting and Procedures Regulations. In this section of law, OFAC “sets forth standard reporting and recordkeeping requirements and license application and other procedures governing transactions regulated pursuant to other parts codified in this chapter, as well as to economic sanctions programs for which implementation and administration are delegated to the Office of Foreign Assets Control.”
Records and Recordkeeping
OFAC requires that individuals and entities keep a record of each prohibited transaction, even if the transaction is committed lawfully through authorizations granted by a special or general license:
“Except as otherwise provided, every person engaging in any transaction subject to the provisions of this chapter shall keep a full and accurate record of each such transaction engaged in, regardless of whether such transaction is effected pursuant to license or otherwise, and such record shall be available for examination for at least 5 years after the date of such transaction.”
Similar recordkeeping requirements pertain to any person holding blocked property or retained funds transfers. Records of blocked property and funds must be kept for the duration of the time the property is blocked and for an additional five years after the property is unblocked or the funds are released.
By law, all records must be furnished upon government request. Such requests are made by administrative subpoena pursuant to 31 C.F.R. 501.602.
Reporting of Blocked Property
Pursuant to OFAC reporting regulations, holders of blocked property — including financial institutions — must report blocked property to OFAC within 10 business days from the date the property was blocked. The report may be filed by the holder of the blocked property or by an attorney on behalf of the holder. There are, however, notable exceptions:
- In the case of blocked trust assets, the trustee is responsible for reporting
- In the case of real property, any US co-owner, legal representative, agent, or property manager in the United States is responsible for reporting. Knowledge that another involved individual has already reported the blocked property does not excuse a person from reporting responsibilities
The initial reports on blocked property must be submitted within 10 business days of the property becoming blocked. These reports must contain the following information:
- A description of the owner or account party
- A description of the property, its location, and account number or other similar identifying reference
- The actual or estimated value of the property
- The date the property was blocked
- The name and address of the holder
- The name and telephone number of a contact person who can provide compliance information
Financial institutions reporting blocked funds have additional requirements:
“If the report is filed by a financial institution and involves the receipt of a payment or transfer of funds which are blocked by the financial institution, the report shall also include a photocopy of the payment or transfer instructions received and shall confirm that the payment has been deposited into a new or existing blocked account which is labeled as such and is established in the name of, or contains a means of clearly identifying the interest of, the individual or entity subject to blocking pursuant to the requirements of this chapter.”
Comprehensive annual reports of all blocked property held as of June 30 of each year are due by September 30 of the same year.
Reports must be made in writing, and OFAC provides reporting forms to facilitate the process. Initial and annual reports must be submitted to the Office of Foreign Assets Control, Compliance Programs Division, US Treasury Department.
Reporting Rejected Transactions
In addition to reporting blocked property or funds, financial institutions must also report rejected transactions: “Any financial institution that rejects a funds transfer where the funds are not blocked under the provisions of this chapter, but where processing the transfer would nonetheless violate, or facilitate an underlying transaction that is prohibited under, other provisions contained in this chapter, must report.” For example, if a US person attempts to transfer funds to Iran, the transaction will be rejected even if neither party involved is a blocked person.
The report of rejected transactions must include the following information:
- Name and address of the transferee financial institution
- Date of the transfer
- Amount of the payment transfer
- Photocopy of the payment or transfer instructions received
- Basis for the rejection of the transfer instructions
- Name and telephone number of a contact person at the transferee financial institution from whom compliance information may be obtained
For information about recordkeeping and reporting requirements as they apply to you or your business, and for help maintaining OFAC compliance, contact an attorney with experience in OFAC and US economic sanctions matters.