What is the SDN list and does it only apply to individuals?
OFAC Attorney: The SDN list is actually called the Specially Designated Nationals and Blocked Persons List. That list is administered by OFAC and includes all of the persons who have sanctions levied against them. Any name that appears on the list is pursuant to one of the legal authorities that authorizes the implementation of sanctions. It is a consolidated list, so persons, organizations, and entities all appear on the same list.
Are people or entities notified when they are placed on the SDN list?
OFAC Attorney: People that appear on the list are not personally notified before they are added to the list. The publication of the SDN List itself, with the name of a targeted person, serves as notice to that person that they have been targeted for sanctions or have had their property blocked pending the outcome of a federal investigation. Such a course of action is legally permissible because the people that are on the list tend to be foreign persons with limited constitutional rights in the United States. Moreover, the element of surprise in naming a sanctions target favors the United States government. If the U.S. government gave notice to that person, then that person could potentially move their goods or property outside of the United States in order to evade the sanctions. Or they can pull their funds and other property out of the possession of U.S. banks and other U.S. persons. The element of surprise is very important to the federal government because they want to make sure that the sanctions hurt. By making the sanctions hurt, the person who is being targeted for sanctions will ideally change their behavior, thereby benefiting U.S. foreign policy and national security.
Are there cases of mistaken identity when someone is put on the SDN list?
OFAC Attorney: A case of mistaken identity is possible. Most of these designations rely on intelligence reports, and sometimes the information in such reports is unreliable. It is possible that somebody could be put on the list having never done anything to hurt the United States. But as a result of their mistaken designation they find that their assets in the United States have been blocked, their bank accounts have been closed, and their credit cards have been cancelled. I’ve seen people lose their jobs in major multinational companies, lose their pensions, and lose access to other important property as a result of being placed on the SDN list. If there is a case of mistaken identity, there is an administrative process within OFAC to remedy the situation. The person will have to file a reconsideration request with OFAC for relief. Having an attorney by your side who is both passionate about your case and knowledgeable about the law would be helpful in any reconsideration request.
How does the SDN list work in practice and what is automated screening?
OFAC Attorney: Sanctions only fulfill their national security and foreign policy objectives if the private sector effectively comply with the regulations. Sanctions target specific people or countries, but the hurt that is associated with sanctions really happens when U.S. businesses and U.S. persons stop themselves from transacting with those targeted people or countries.
Automated screening happens at banks. Banks have automated screening systems that filter through the names and countries in a given transaction to see if there are any matches with names on the SDN list or a country that is subject to sanctions. At that point, the transaction is slowed down so that someone can examine it more closely to see whether the automated screening system flagged someone by mistake or whether the person is actually on the list. After some investigation, and only after the bank employee believes the transaction is authorized, will it be processed. If the transaction involves an SDN or a sanctioned country, the bank’s response is dictated by the law underlying the designation or sanctions program. In most situations the transaction is either rejected or blocked (frozen).
For example, if the transaction implicates the Iranian Transactions and Sanctions Regulations (ITSR), then the transaction will likely be rejected. Rejected transactions mean the funds go back to the originator. If, however, the person was designated pursuant to one of the weapons of mass destruction sanctions, the bank would be obligated to block (i.e., freeze) the money. The bank would have to put the money in a blocked account and notify OFAC of the blocking action within ten days and provide certain additional information to the agency as required by law.