OFAC SDN List Removal Lawyer: FAQs

OFAC SDN List Lawyer: FAQs

1. How can a person get off of the OFAC SDN List?

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) administers the list of Specially Designated Nationals and Blocked Persons, also known as the SDN List. There are multiple ways to get off of OFAC’s SDN List, but most removal efforts must start with an “administrative reconsideration” submitted with OFAC pursuant to 31 CFR Section 501.807.

There is no “standard” administrative reconsideration. Each SDN designation is made upon varying policy considerations and factual circumstances. As such, an administrative reconsideration should respond to those particular considerations and circumstances that gave rise to the designation. It may also be helpful to support the arguments made in an administrative reconsideration with favorable evidence and other facts that refute the government’s SDN designation.

Another means getting off of the SDN List is through a negotiated settlement with OFAC and other federal agencies. This usually entails cooperating with law enforcement in a criminal investigation, negotiating terms of removal in a plea agreement, or contributing to the intelligence gathering efforts of the United States.

Developing an effective SDN List removal strategy requires an in-depth factual investigation. Unlike a defendant in a criminal case, a person designated by OFAC is not presumed innocent. A designated person must be able to factually (and credibly) demonstrate they are innocent.

2. What happens after filing an SDN List administrative reconsideration or SDN List removal request with OFAC?

The Office of Foreign Assets Control (OFAC) may respond to an administrative reconsideration or removal request in a variety of ways. First, OFAC may respond with a questionnaire containing specific questions about the assertions made in an administrative reconsideration. This questionnaire may also reveal the particular facts and circumstances OFAC has issues with and that may have contributed to the original designation.

Responding to this questionnaire in a comprehensive and truthful manner is important to most SDN List removal efforts. It presents an opportunity to submit additional information and evidence regarding a person’s SDN designation and why that designation should be reconsidered by OFAC. Given the classified (and undisclosed) nature of the evidence OFAC uses to substantiate its designations, these questionnaires may also provide rare insight into the particular circumstances justifying a designation. Using such insights to further a person’s SDN reconsideration is important.

OFAC may also respond to an administrative reconsideration or removal request by denying the request. Although regrettable, a denial does present an opportunity to escalate the SDN reconsideration to U.S. District Court for consideration before a judge. This is because an OFAC denial of an SDN reconsideration is considered a final agency action. A final agency action is often a prerequisite to challenging an agency in federal court under the Administrative Procedures Act.

OFAC may also respond to an administrative reconsideration by removing a person’s name from the SDN List. OFAC usually sends a letter to the applicant stating that OFAC has sufficient credible information to reverse its original SDN designation. This change to the SDN List will be published on OFAC’s website and in the Federal Register.

3. Is it legal for the United States to put me on the OFAC SDN List?

Yes. The United States has a law called the International Emergency Economic Powers Act (IEEPA) which authorizes the President to broadly restrict and regulate the foreign dealings of U.S. persons. So although a person’s name appears on the SDN List, the restrictions on dealing with that person are imposed against U.S. persons. The impact of such restrictions is the designated person’s near-total exclusion from the U.S. economy and U.S. financial system.

There are also other laws that authorize the President to apply economic sanctions against a person, including the Trading with the Enemy Act (TWEA), the Sergei Magnitsky Rule of Law Accountability Act of 2012, and the Foreign Narcotics Kingpin Designation Act.

4. Companies and banks refuse to do business with me now that I am on the OFAC SDN List. Is this legal?

In most cases, yes. U.S. companies and U.S. banks are prohibited from doing business with anyone whose name appears on the OFAC SDN List. U.S. companies and banks are subject to severe financial penalties for doing business with designated persons. The intended impact of such prohibitions is that a designated person is excluded from the U.S. economy and U.S. financial system.

Although U.S. economic sanctions do not technically apply to non-U.S. banks or companies, many foreign companies will voluntarily choose not to do business with people whose names appear on the OFAC SDN List. This choice is often the result of perceived reputational risks of doing business with designated persons. Many foreign companies also employ U.S. persons and do business with U.S. companies, which create complicated compliance issues if they were to also do business with people whose names appear on the SDN List. It’s often easier and less risky to simply refuse to do business with designated persons.

Depending on the foreign country one is located in, refusal of service from foreign businesses may be grounds for a claim of unlawful discrimination. Such options can be explored by foreign lawyers in consultation with attorneys knowledgeable about OFAC sanctions.

5. I was recently removed from the OFAC SDN List but businesses and banks still refuse to do business with me. Why?

This is likely an unfortunate consequence of the severe penalties recently levied against businesses and banks that violate OFAC sanctions. Such severe enforcement actions have caused many businesses and banks to “over-comply” with sanctions regulations in an effort to limit their liability.

Even when a person is no longer on OFAC’s SDN List, search engines and the internet have made it easy to discover a person’s prior SDN designation. Once discovered, many banks and businesses will determine that the risks associated with doing business with a formerly designated person do not outweigh the benefits.

To limit the instances of such an inconvenience it may be helpful to reclaim your online identity and cleanse it of the damaging associations. This can be done in a variety of ways, including building new websites that highlight the circumstances of your de-listing and requesting other websites to take down or correct pages that contain damaging and outdated information. Unique problems such as these require creative solutions.