Criminal Defense Lawyers

Identifying OFAC Blocked Property and Assets

Dealing with blocked property and assets under OFAC regulations can be tricky, but it’s important for companies to understand and comply. This article will walk through what OFAC is, what constitutes blocked property, how to identify it, and what to do if you find you have some. I’ll try to explain it in simple terms!

What is OFAC?

OFAC stands for the Office of Foreign Assets Control, which is part of the US Department of Treasury¹. OFAC administers and enforces economic and trade sanctions against targeted foreign countries, regimes, terrorists, international narcotics traffickers, and more. These sanctions can block assets and prohibit transactions with certain persons and entities.

What is considered blocked property under OFAC regulations?

The term “blocked property” refers to any property or assets in which a sanctioned country, entity, or individual has an interest. This includes:

• Funds or assets owned or controlled by sanctioned parties
• Funds or assets in which sanctioned parties have an ownership stake of 50% or more
• Funds or assets derived from transactions with sanctioned parties

Some examples of potentially blocked assets are:

• Wire transfers or payments involving a sanctioned entity
• Real estate or property owned by a sanctioned individual
• Company shares or equity owned by a sanctioned party

How to identify blocked property and assets

Here are some tips for identifying blocked property:

1. Screen all customers and transactions against OFAC’s Specially Designated Nationals (SDN) list. This list contains individuals and companies owned or controlled by sanctioned parties².
2. Review ownership structures of entities you deal with. Check for ownership stakes of 50% or more by blocked persons³.
3. Be alert for red flags like wire transfers referencing a sanctioned entity, or transactions involving high-risk geographic locations.
4. Monitor transactions and customer relationships continuously for changes that could trigger OFAC issues.
5. If a potential match is found, gather all details and confirm whether it is a valid match or false positive⁴.

What to do if you find blocked property

If you identify blocked assets or transactions:

1. Immediately block or reject the transaction. Freeze any assets and prevent them from being transferred.
2. Report it to OFAC within 10 days using the appropriate forms⁵.
3. Prohibit any further unlicensed dealings connected to the blocked property.
4. Annually report blocked property to OFAC by September 30⁶.

The owner of the blocked property can submit a license application to OFAC requesting the asset be unfrozen. But you must not release the assets until a specific license is granted.

Penalties for violations

Civil penalties for OFAC violations can be up to $307,922 per violation. Criminal fines for willful violations can be up to $1 million, along with up to 20 years imprisonment⁷. Given the severe consequences, it’s critical to have effective compliance procedures for identifying and handling blocked assets.

Risks with non-blocked entities

There can also be risks dealing with non-blocked entities that are owned 50% or more by blocked parties. While not directly sanctioned, these could get flagged in the future. It’s wise to exercise caution when transacting with such entities⁸.

Adopting a risk-based approach

OFAC rules can be complex, so it helps to take a risk-based approach. Focus compliance efforts on high-risk areas, and adopt screening processes proportional to your operations. Partnering with experts like lawyers can also help strengthen your compliance program.

I hope this overview gives you a better understanding of blocked assets and how to identify them within your organization. OFAC rules aim to limit prohibited dealings with sanctioned parties. While compliance takes effort, it’s crucial for avoiding penalties and protecting your reputation.

References

1. OFAC Frequently Asked Questions

2. OFAC 50% Rule on Blocked Persons

3. OFAC on Blocking and Rejecting Transactions

4. OFAC on Reporting Requirements

5. OFAC Reporting System

6. OFAC on Control by Blocked Persons

7. OFAC Sanctions Compliance Guidelines

8. OFAC Civil Penalties Information