OFAC Amends Reporting Requirements with Eye for Sanctions Evasion
On May 10, 2024, OFAC issued an interim final rule to amend the "Reporting, Procedures and Penalties Regulations" of 31 CFR Part 501. Notably, OFAC will require a report within 10 business days from the date of a transaction that unblocks, or transfers blocked property, including "pursuant to a valid order issued by a U.S. government agency or U.S. court." OFAC explained that these new requirements will help determine the current status of blocked and unblocked property, helping OFAC tracking transactions of property owned by sanctioned individuals or entities. These changes will come into effect on August 8, 2024. A likely impact is that any unblocking related to sanctions russian parties will / should be subject to higher scrutiny.
The added reporting requirement applies to any "U.S. person," who are required to block such property in the first place. The reports must detail the person holding the property prior to the transfer or prior to the release from blocked status, the date the property was transferred or unblocked, a description of the property and of the transaction, as well as the SDN at issue. The amendments also clarify the definition of U.S. persons, which includes U.S. individuals and U.S. businesses as well as U.S. financial institutions.
OFAC also clarified the scope and types of rejected transactions reportable by non-financial institutions, which include transactions involving securities, checks, foreign exchange, and sales or purchases of goods or services. OFAC also revised the procedures to request the release blocked property because of mistaken identity, typographical, or similar errors.
As it has recently publicized by sanctioning proxies of Russian oligarch Oleg Deripaska, OFAC has targeted SDNs and their proxies who try to put together elaborate sanctions evasion schemes to unblock property by operation of law. The new requirement to report transactions that unblock property allows OFAC to keep an eye on sanctions evaders and gain an opportunity to quickly respond to (likely) sham transactions. We would encourage any person involved in a transaction that would unblock or transfer previously blocked property to conduct thorough due diligence to ensure that the scheme is bona fide, and to avoid sales and acquisitions to shell companies or proxies with links to sanctioned individuals. Such links would surely be difficult to uncover, but OFAC now made it clear that any such transaction merits a higher scrutiny from the participants as well as the mighty OFAC itself.
Vicki Tang
Kenneth Lee
Stephen Casner
Director, Global Impact Programs | Diversity, Equity & Inclusion | Programming & Partnerships
1wLong time, no see Justin D'Agostino MH! Hope you and Alexander Dmitrenko are both doing great! ❤️