FAQs

OFAC Attorney: OFAC stands for the Office of Foreign Assets Control. It is the federal agency in the U.S. Department of the Treasury responsible for the administration, implementation, and enforcement of economic sanctions programs. The agency works closely with other federal agencies and the intelligence community to develop sanctions programs that further U.S. foreign policy and national security objectives.

OFAC Attorney: OFAC is the federal agency responsible for the administration, implementation, and enforcement of economic sanctions. This means that OFAC drafts regulations, directives, and executive orders related to economic sanctions. OFAC also has an enforcement function where it carries out investigations into possible violations of sanction regulations. The agency also levies financial penalties and negotiates settlements with those it has determined have violated its rules. OFAC’s enforcement functions are primarily carried out by its Compliance Division and its Office of Enforcement. The Compliance Division focuses on financial institutions and banks, while the Office of Enforcement carries out enforcement actions against everyone else. OFAC also has a Licensing Division that evaluates applications submitted by people and businesses to determine whether otherwise prohibited transactions are consistent with the U.S. foreign policy and national security objectives.

SDN stands for specially designated national. The Office of Foreign Asset Control (OFAC) places individuals and entities on this list for national security, foreign policy, and sanctions policy objectives. If someone is placed on the list, it means they have been acting against the foreign policy and sanctions policy of the United States and have effectively been walled off from the international marketplace, particularly the U.S. financial system. As the U.S. economy is a major player in the international business market, placement on the SDN list makes it exceptionally difficult to engage in international transactions, particularly in U.S. dollars.

Placement on and Removal from the SDN List

When OFAC adds an individual or entity to the SDN list, it provides information explaining the decision. Typically, one can find the reason for the placement on the SDN list by way of reports that the Department of Treasury puts out at the time of the designation. It is important to review these issues and address them in any requests for reconsideration or petition for removal.

To get a name removed from the SDN list, a person or entity must submit a petition for removal or a request for administrative consideration to OFAC. This administrative consideration must effectively state and argue that the person or entity has changed its behavior and will no longer engage in the prohibited activities. It is also necessary to show that they have divested from any potentially sanctionable activity after they incurred sanctions liability. Removal may also be possible if the individual or entity can provide evidence showing OFAC made an error in judgment in placing them on the SDN list.

After filing the request, OFAC reviews it and typically responds with numerous questions in an attempt to gain a more complete picture. This may happen several times. The entire process may take months or even years, depending on the complexity of the case and OFAC’s timeline.

What is an OFAC Administrative Subpoena?

An OFAC administrative subpoena is a legal request from the U.S. government to answer questions about activities or transactions that may have violated U.S. sanctions. The administrative subpoena requires an in-depth response to OFAC. At the time OFAC issues an administrative subpoena, no decision has yet been made by the government on any civil or criminal penalties involved in a potential violation of U.S. Sanctions.

OFAC Attorney: Yes. The SDN list is publicly available so that U.S. persons, banks, and financial institutions can identify and evaluate whether they are prohibited from transacting with a particular person. A typical entry on the SDN list publicly identifies the designated person’s name, aliases, addresses, citizenship, passport and other identification numbers, and the country of residence of that person. The list also idicates which specific sanctions program and legal authorities a particular person was designated under.

Interviewee: Yes, you can. OFAC has the discretion to issue licenses authorizing U.S. persons to engage in conduct that is otherwise prohibited. Although a person can technically apply to undertake any kind of transaction, some sanctions programs contain statements of licensing policy identifying particular activities that OFAC would be willing to authorize. For example, in the Iran sanctions context, there is a favorable licensing policy for the sale of civilian aircraft parts to Iran to improve aircraft safety. There are also favorable licensing policies for the export of food, medicine, and medical devices to some of the other sanctioned countries as well.

OFAC Attorney: An OFAC subpoena is a formal demand from OFAC for records, documents, and information. The issuance of an OFAC subpoena usually indicates that the person receiving the subpoena is under investigation by OFAC for potential violations of sanctions regulations. A person receiving the subpoena is generally required to comply with the subpoena within 30 days. If 30 days is not enough time, a person can request additional time to comply with the subpoena. People should always be aware that any materially false or misleading statements made to OFAC in response to a subpoena can form the basis of a separate criminal prosecution for false statements.

OFAC Attorney: The statute of limitations for an OFAC violation is usually five years. However, the calculation of the statute of limitations can be impacted by factors such as the existence of a conspiracy or whether a person suspected of violating OFAC sanctions is outside of the United States. In those situations, the calculation of the statute of limitations can be extended to a period of time longer than five actual years. The legal term for such an extension of the statute of limitations is “tolling.”

OFAC Attorney: A person engaging in any transaction that is subject to U.S. economic sanctions must keep full and accurate records of each such transaction for a period of five years from the date of the transaction. People or businesses that are holding blocked property must keep full and accurate records regarding such property for the entire time the property is blocked and for five years after the property has been unblocked.

OFAC Attorney: Prohibited transactions are trade or financial transactions and other dealings in which U.S. persons may not engage unless they are authorized by OFAC or are expressly exempted by statute. Because each sanctions program is based on different foreign policy and national security goals, the prohibitions may vary between the programs.  These variations can even exist when interpreting the same regulatory language across different sanctions programs.  This is one of the reasons it is important to speak with an experienced sanctions attorney before speaking with OFAC.

OFAC Attorney: A blocked or frozen asset is subject to significant restrictions due to the imposition of economic sanctions administered by OFAC. Title to blocked property remains with the target, but the exercise of powers and privileges normally associated with ownership of the property is prohibited without OFAC’s prior authorization. Blocking an asset immediately imposes an across-the-board prohibition against transfers or dealings of any kind with regard to the property. The terms “blocked” and “frozen” are interchangeable and OFAC uses the terms to describe the same thing.

OFAC Attorney: All U.S. persons are required to comply with OFAC regulations. U.S. persons are defined as any individual present in the United States and every U.S. citizen and U.S. permanent resident located anywhere in the world.  The definition of U.S. persons also includes entities formed in the United States or incorporated in the United States and the branches of any foreign entities that are located in the United States. The foreign subsidiaries of a U.S. parent company are also subject to OFAC regulations and must comply with them.

OFAC Attorney: Yes, it is. As long as a blocked person or country also has an interest in your transaction, a U.S. person or bank will be required to block that transaction. OFAC broadly defines the term “interest” to include future, contingent, direct, indirect, tangible, or intangible interests in property. Even though multiple people can have an interest in the property, the existence of a blocked interest can cause the entire property to be blocked. In these instances it is important to hire an attorney who can seek license authorization from OFAC to unblock your interest in the property.

Additionally, the property will remain blocked until OFAC releases the property or the blocked interest is no longer considered blocked. The latter usually only happens when a designated person successfully petitions OFAC to be removed from the SDN list.