The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) implements and administers economic sanctions in the U.S. Somewhat counter-intuitively, OFAC sanctions do not regulate or impose legal obligations upon the parties targeted by the economic sanctions. Rather, OFAC sanctions regulate all U.S. individuals, entities, and organizations, and some of the foreign subsidiaries of U.S. companies.
As a result, OFAC sanctions work by prohibiting U.S. persons from interacting with targeted non-U.S. persons in different ways, depending on the specific sanctions. Often, these prohibitions apply to financial transactions, commercial dealings, imports, exports, insurance, and shipping. The intended result of such restrictions is the exclusion of the targeted person from the U.S. financial system and economy.
The content below is purely for informational purposes and it is not a substitute for the experience and knowledge of a qualified OFAC subpoena lawyer.
OFAC’s sanctions can arise from different legal authority. Typically, they implement executive orders issued by the President pursuant to presidential national emergency powers. The International Economic Emergency Powers Acts (IEEPA) gives the President the legal authority to issue economic sanctions against nations, individuals, and entities posing a threat to the United States economy, foreign policy, or national security. See 50 USC Section 1701. In other circumstances (for example, with the Magnitsky Sanctions Program), OFAC sanctions are the result of laws passed by Congress. Other times, OFAC sanctions derive authority from international agreements or United Nations Security Council resolutions.
OFAC’s specific authority to issue subpoenas is derived from 31 CFR Section 501.602. As provided in that section, OFAC has the authority to “conduct investigations, hold hearings, administer oaths, examine witnesses, receive evidence, take depositions, and require by subpoena the attendance and testimony of witnesses and the production of all books, papers, and documents relating to any matter under investigation.”
OFAC sanctions are organized into OFAC sanctions programs. They generally fall into two broad categories: country-based sanctions and smart sanctions. A suspected violation of any of these sanctions can result in being served an OFAC administrative subpoena, at which point it may be in your best interest to consider consulting with an OFAC subpoena attorney.
Currently, there are five nations that are subject to OFAC’s broad country-based sanctions: Cuba, Iran, North Korea, Sudan, Crimea, and Syria. Burma (Myanmar) was subject to country-based sanctions until recently, when the progress of democratic reform in Burma caused the U.S. to lift the country-based sanctions. With country-based sanctions, all activity with the nation, its government, and the individuals and entities in the nation is prohibited, although the scope of the prohibitions is different with different sanctions programs.
Smart (List-Based) Sanctions
Smart sanctions, or list-based sanctions, do not target entire nations. Rather, non-U.S. individuals, entities, and organizations can be designated by OFAC. Once designated, the person is placed upon the Specially Designated Nationals and Blocked Persons List, or SDN List.
When a foreign person is placed upon the SDN List, all U.S. persons (including financial institutions) are forbidden from engaging in transactions with the designated person. Furthermore, all property, money, or bank accounts in the United States or that fall within U.S. jurisdiction will be blocked. This includes property or money in accounts of U.S. financial institutions. Blocked property is frozen and cannot be transferred to the designated person. Any movement or transfer of such blocked property will require an OFAC license.
OFAC Administrative Subpoenas
When OFAC suspects that you are in violation of OFAC sanctions, it serves you with an OFAC administrative subpoena. This means that it has reason to believe that you engaged in prohibited transactions with a person on the SDN List or that you may have engaged in activity with a person in a sanctioned nation. An OFAC subpoena lawyer can provide a more detailed and fact-specific explanation of why OFAC may be investigating you, as well as counsel you through OFAC investigative practices.
An OFAC administrative subpoena is an official legal request for a description and all documentation of one’s transactions or dealings with a specific person, entity, or nation. This requires you to collect all the relevant documents in a timely manner (usually 30 days). In addition, the subpoena will likely ask a number of questions about your dealings and transactions that need to be answered truthfully.
OFAC will look for certain information. First, it will look for a description and documentation of the extent of the suspect transactions. Second, OFAC will want to know the time period through which these transactions occurred. Third, OFAC will want to know the role you or your entity played in these transactions. In addition, OFAC will likely ask for general information surrounding these transactions, to provide context for their investigation.
The Role of an OFAC Subpoena Lawyer
You are required to respond to the subpoena and to do so truthfully. Thus, it is important that you consult with an OFAC subpoena lawyer who can help you in several ways:
- Identify the relevant OFAC sanctions for your case, and interpret those sanctions;
- Thoroughly review your documentation and transactions (in other words, the available evidence) to determine precisely what occurred or what might have occurred;
- Help you respond to the subpoena’s questions in a straightforward manner that provides the relevant information to OFAC, in addition to information that may help or mitigate your case;
- Perform an analysis of OFAC’s Economic Sanctions Enforcement Guidelines to determine the relevance of both mitigating and aggravating facts in your case; and
- Ensure that you or your company appears cooperative and open with OFAC.
If you have any questions about OFAC sanctions or OFAC administrative subpoenas, please contact (202) 517-1611 to schedule an initial no-cost case evaluation with an experienced OFAC subpoena lawyer.