The Department of the Treasury’s Office of Foreign Assets Control (OFAC) can designate a foreign individual, business, or organization on the basis of national security, foreign policy, or economic policy concerns. The person (including entities) designated is then added to the Specially Designated Nationals and Blocked Persons List, or SDN List.
The SDN List
The consequences of being placed on the SDN List are severe. First, all U.S. persons (including companies and financial institutions) are prohibited from engaging in transactions or conducting business with you or any company of which you own or control more than 50 percent. Such prohibitions can have a devastating effect on your business and reputation world-wide.
Second, any property, money, or accounts within the United States and its territories, or that enter into the United States becomes blocked. Blocked means that the property, money, or account will be held or frozen in an interest-accruing account for as long as you are on the SDN List. This is particularly problematic in the modern age where property (particularly money) is often transferred through different banks, money services, and other financial institutions. Even if your transaction is foreign it can be subject to blocking because the accompanying financial transaction may be conducted in U.S. dollars or “passing through” a U.S. financial institution.
Furthermore, OFAC provides the tools and resources for financial institutions and other business and individuals to comply with the sanctions by screening for names on the SDN List. Indeed, the power of list-based sanctions is largely drawn from the effectiveness of automated screening as an enforcement mechanism. Given the very large penalties that have been levied against international banks and businesses, complying with OFAC regulations has become a priority for nearly every major or midsized international financial institution.
Request for Reconsideration
Although people placed on the SDN List have often tried to challenge the designation through the U.S. Department of Justice, the proper process to follow is to file a Request for Reconsideration (also known as a Petition for Review) with OFAC. 31 CFR Part 501.807 covers the procedures governing delisting from the SDN list.
It is important to note that this is not a quick process. An OFAC Request for Reconsideration is not simply an application. Rather, it requires an OFAC sanctions lawyer to become intimately familiar with the designated individual’s or entity’s financial transactions and business relationships. After thoroughly reviewing the facts of the designated person’s case, an OFAC sanctions lawyer will begin to build a case for why the designated person should be removed from the SDN List.
One part of this process is the discovery process, which can provide the OFAC sanctions lawyer with evidence held by the government or other actors. Another segment of the process is the possibility of participating in an OFAC hearing or OFAC interview (the request for a hearing or interview must be included in the Request for Reconsideration).
Ultimately, your OFAC sanctions lawyer will build a case that either (1) the designation is a product of mistaken identity, or that (2) the circumstances have sufficiently changed to warrant removal from the SDN List.
In either case, OFAC takes a long time to respond and the process, once it has begun, can last several years.
Cases of mistaken identity resulting in wrongful SDN listings are, unfortunately, common. This can happen for various reasons.
Sometimes mistaken identity can be the result of same or similar names with the intended target of the designation, or similar family connections and acquaintances. In such a case, an OFAC sanctions lawyer can help build a credible case demonstrating why the error may have occurred and further demonstrate why your designation is unwarranted.
In other cases, certain enforcement mechanisms of the SDN List may be triggered against you because of automated screening. Under these circumstances, it may be that you were not placed on the SDN List, rather a “soft alias” or “soft aka” caused a bank or other actor to block your assets and contact OFAC.
In this situation, an OFAC sanctions lawyer can work with you to figure out precisely why you are being treated as though you are on the SDN List and, more importantly, build a case demonstrating that you are not the intended target of the designation. Unblocking these mistakenly frozen funds will require filing a specific license application with OFAC.
Change in Circumstances
Sometimes, however, a designation is not the result of mistaken identity. Indeed, in some cases the political and economic climate in the U.S. and across the globe may cause OFAC to intentionally designate you as a Specially Designated National and add you to the SDN List.
If this occurs, it is likely that the OFAC’s sanctions programs, regulations, and press releases will provide some insight into the reasoning behind your designation. An OFAC sanctions lawyer can conduct a thorough audit of your financial transactions and business dealings to determine precisely why you have been so designated.
Although you may disagree with your designation, it is almost certain that OFAC will not remove your name from the SDN List because of a complaint. Rather, as an OFAC sanctions lawyer can explain in greater detail, the next step to secure SDN List removal is to conduct an audit (as described above) and then to take action to sever the kinds of transactions and business dealings that conflict with U.S. national security, foreign policy, or economic policy. This is not a simple task, and the aid of an experienced OFAC lawyer is vital to choosing the proper course of action. 31 CFR Part 501.807(a) describes the sort of remedial action that can strengthen a case for reconsideration, including: “corporate reorganization, resignations of persons from positions in a blocked entity, or similar steps, which the person believes would negate the basis for designation” (here it is in pdf).
If enough time has passed, or U.S. policy goals have shifted, it is possible that you may have a strong case for SDN List removal without taking significant action. Proactive measures, however, may demonstrate a willingness to change business practices (whether the initial bad practices were intentional or not). Each case is unique, and an experienced OFAC sanctions lawyer will have the skills and resources to develop a suitable plan for the facts in your case.
If your first Request for Reconsideration is denied by OFAC, your attorney can work with you to take further measures and to build a new and stronger case based on the current circumstances.