In an effort to protect and advance the U.S. economy and U.S. national security and foreign policy objectives, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) broadly regulates nearly all economic and business transactions involving countries, entities, and individuals who are reasonably believed to threaten the United States. To carry out its mission, OFAC administers a wide range of economic sanctions programs. Economic sanctions can apply to:
- Foreign countries
- Foreign nationals
- Political regimes
- Criminal organizations
- International drug traffickers
- Foreign companies
- Foreign financial institutions and banks
- Vessels and ships
Supporters, front companies, and those who are otherwise owned or controlled by sanctioned persons may also be considered threats to the United States. Often times, those additional persons are also subject to economic and trade sanctions and find themselves listed on the Specially Designated Nationals and Blocked Persons List (SDN List). U.S. persons must remain vigilant and screen transactions to mitigate against the possibility of dealing with otherwise prohibited persons.
OFAC can administer civil penalties (i.e., fines) against any individuals or entities subject to U.S. jurisdiction if the agency determines that a violation has occurred. In cases involving willful violations, a person may face criminal prosecution and imprisonment. Those under investigation for noncompliance with U.S. economic sanctions, those who suspect they may be or may have been involved in activities which violate sanction regulations, or those embarking upon new or risky foreign business stand to benefit from the assistance of an experienced OFAC sanctions attorney.
OFAC Licensing and Transactional Authorization
Some transactions which would otherwise violate U.S. economic sanctions are authorized with proper licensing. Those in international business and commerce should take certain precautions, such as having a legal professional analyze transactions to determine the need for licensing. Preventing a violation is often the best defense. It is usually the most cost effective course of action when compared to defending against and OFAC investigation or enforcement action.
An attorney can provide counsel regarding the need for OFAC authorization and can assist with securing such licenses. The license application process is also available online through the Treasury Department’s OFAC License Application Page. However, prior to submitting information to the agency, it is advisable to analyze one’s proposed transaction in light of various statements of licensing policy and make reference to such policies in the application. It is also important not to inadvertently expose oneself to liability by disclosing a past violation when describing a transaction.
OFAC provides both general and specific licenses. A general license allows a class of persons to be involved in a specific transaction without having to file a license application. One must only fulfill the requirements as proscribed in the general license in order to benefit from its authorization.
In the case of a specific license, however, OFAC — in response to a written license application — issues a written document to a specific individual or entity authorizing a particular transaction. When a license is issued it is imperative that those involved in the transaction adhere to the specifications and conditions of the license to avoid a violation of the sanctions.
The Specially Designated Nationals and Blocked Persons List (SDN List):
In an effort to enforce sanctions against targeted countries and regimes, OFAC has compiled a list of names known as the Specially Designated Nationals and Blocked Persons List (SDN list). This list provides the names of individuals, companies, groups, and other entities that pose a threat to U.S. national security, foreign policy, and economic goals. Whether working alone, as part of a terrorist or criminal network, or on behalf of a targeted country or regime, those noted as SDNs are the specific targets of sanctions and subject to having their assets frozen.
It is generally unlawful under OFAC-administered sanctions for any U.S. business, U.S. citizen, U.S. permanent resident, or person located in the United States to participate in any economic trade or other activity with any SDN designated person. And depending upon which sanctions program a particular SDN is listed, U.S. persons may also be required to immediately freeze or block any property in which an SDN has any interest, including interests in funds, accounts, contracts, agreements, personal property, and real property. Such property must remain blocked indefinitely until OFAC authorizes unblocking the property.
SDN List Removal
A current list of SDNs is made available through the OFAC website. This list is updated as needed, and names are frequently added and removed as new threats appear, are cleared, or eliminated.
On occasion, individuals or entities who are under suspicion of illicit activity are improperly designated as an SDN. In such cases, an attorney can provide legal assistance to clear the name from the SDN List, setting the record straight to unfreeze assets, unblock property, and restore economic and business rights, as well as restoring one’s personal and professional reputation.
If an individual is designated as an SDN or is a potential match for an SDN, credit reporting software may flag the individual and issue an alert on his or her credit report. This new process is part of an extensive effort credit agencies and credit bureaus have undertaken to ensure OFAC compliance. Upon notification of an alert, a check is made regarding the validity of the claim. If the OFAC alert is unsubstantiated, no action is taken. However, if the individual in question is determined a designated SDN, the finding is reported to OFAC.
If an individual is mistakenly flagged as an SDN, the notification may remain on his or her credit report unless it is requested that the alert be removed. The Fair Credit Reporting Act (FCRA) authorizes an individual to take action to correct his or her record by contacting the credit agency or bureau responsible for the erroneous information. If complications arise, an attorney who is experienced with OFAC and U.S. economic sanctions may be able to assist.