Criminal Defense Lawyers

Managing Accounts and Assets Blocked by OFAC

Having your accounts or assets blocked by the Office of Foreign Assets Control (OFAC) can be a confusing and stressful situation. OFAC administers and enforces economic sanctions programs against targeted foreign countries, regimes, terrorists, narcotics traffickers, and others who pose a threat to U.S. national security and foreign policy.

If you find yourself in this situation, it’s important to understand OFAC regulations and how to properly manage blocked accounts and assets. This article provides an overview of key information for individuals and companies dealing with OFAC blocks.

What it Means for Accounts and Assets to be Blocked

If OFAC designates you as a sanctioned party, any accounts or assets you hold subject to U.S. jurisdiction will be “blocked” or frozen. This means:

• You are prohibited from accessing the funds or assets
• The funds cannot be transferred, paid out, or withdrawn
• Any assets must be frozen

Financial institutions are required to block any accounts or assets belonging to sanctioned individuals or entities. If you try to open a new account, the bank will check their customer names against the OFAC Specially Designated Nationals (SDN) list and will not open an account for anyone on the list.

Getting Accounts and Assets Unblocked

To get your blocked accounts or assets unblocked, you need to submit a license application to OFAC. This involves demonstrating you are not who OFAC thinks you are, or that the block was made in error. It’s advisable to hire a sanctions lawyer to handle this complex process and present your case to OFAC.

If OFAC grants your license application, your accounts and assets will be unblocked. However, this is not a quick process. It can take many months or even years for OFAC to review a license application and make a determination. You need to be patient and persistent throughout the process.

Managing Blocked Accounts

While your accounts are blocked, there are certain actions you can take to responsibly manage the frozen funds:

• Notify OFAC of any blocked property you hold by filing the Annual Report of Blocked Property by September 30 each year
• Place the blocked funds into an interest-bearing account to generate interest income
• Pay normal service charges to your financial institution from the blocked account
• Use blocked funds to pay taxes, legal fees, and living expenses with authorization from OFAC
• Avoid dissipating or diminishing the value of blocked property through negligence or mismanagement

While blocked, the funds and assets still rightfully belong to you. So you want to preserve their existence and value while prohibited from accessing them.

Penalties for Violating OFAC Blocks

It’s critical to avoid violating the OFAC block restrictions in any way. Penalties for unauthorized use of blocked funds or assets can be severe:

• Civil monetary fines up to the greater of $307,922 or twice the value of the transaction
• Criminal fines up to $1 million and imprisonment up to 20 years for willful violations
• Loss of export privileges

Any transaction with blocked property requires explicit authorization from OFAC. This includes things like selling, transferring, or accessing the funds or assets in any way. Don’t attempt to avoid or evade the block without permission.

Challenging an OFAC Block

If you believe your accounts or assets were blocked in error, you can challenge the action through OFAC’s administrative reconsideration process. This involves submitting a detailed request to OFAC to reconsider their determination.

To succeed, you’ll need to provide evidence the block was made incorrectly or that you’ve been mistaken for someone else on the SDN list. It’s recommended to engage an attorney experienced in OFAC cases to handle reconsideration requests.

Managing Blocked Accounts Overseas

OFAC sanctions apply globally to U.S. citizens and permanent residents wherever they are located. So if you have blocked accounts abroad, the same prohibitions on accessing or transferring the funds apply.

However, foreign subsidiaries of U.S. banks may not be required to block accounts based solely on OFAC designations. Consult qualified legal counsel in the relevant countries to fully understand your rights and restrictions overseas.

Tax Implications of Blocked Accounts

Blocked funds remain subject to income tax even though you cannot access them. Interest earned on blocked accounts is considered taxable income. You are still responsible for declaring and paying taxes on blocked account earnings and assets.

OFAC may grant a specific license authorizing you to use a portion of blocked funds to pay federal taxes. Be sure to file for this authorization if you lack funds to pay taxes on blocked income.

Using Blocked Funds for Legal Fees

You can apply for an OFAC license to use blocked funds to pay legal fees related to services like:

• Filing a license application or administrative reconsideration request
• Defending against government penalties or forfeiture proceedings
• Seeking civil damages for wrongful blocking

However, legal services cannot involve challenging or violating the OFAC blocking order itself. And even authorized legal fees must be reasonable and customary for the type of service.

Paying Living Expenses from Blocked Accounts

If the blocking of your assets leaves you unable to cover basic living expenses, you can request an OFAC specific license to unblock some funds. This requires demonstrating severe financial hardship and submitting detailed documentation of your monthly income and expenses.

OFAC will only authorize release of the minimum amount required to cover your basic necessities like food, housing, medical care, taxes, and other critical payments. The amount released will be limited to reasonable estimates of your actual basic expenses.

To apply for a specific license, you’ll need to provide:

• A detailed personal financial statement showing all sources of income, assets, liabilities, and monthly expenses
• Bank statements and bills documenting your normal expenditures
• A thorough explanation of how blocking your accounts causes financial hardship
• A proposal of the precise amount needed for living expenses and justification for why this is the minimum necessary

OFAC will review the application closely to verify your need and minimize the amount unblocked. Expect a very modest, restricted release of funds – not free access to your full blocked account balance. And you’ll need to reapply periodically to renew the license as your circumstances change.

While this process provides a potential avenue for releasing some funds to pay for necessities, it is still very limited. You cannot rely on OFAC licenses to fully fund ongoing living expenses long-term. Your best option is getting your accounts fully unblocked through the reconsideration process if possible.

The reconsideration process allows you to challenge the basis for the OFAC block and provide evidence that it was made in error. If you can demonstrate you’ve been mistaken for someone else or that the block violates your rights, OFAC may fully remove the restrictions on your accounts and assets.

Some key tips for getting accounts unblocked through reconsideration include:

• Submitting a detailed written explanation of why the block is factually incorrect
• Providing documentation like bank records, IDs, and affidavits showing your identity
• Citing legal precedents that support removing the block
• Retaining an experienced OFAC attorney to prepare your reconsideration case

While the process can take many months and require persistence, succeeding with a reconsideration request is the best way to regain full access to your funds and assets. Specific licenses to release some living expenses offer only temporary, limited relief.

Tips for a Successful Reconsideration Request

• Provide as much evidence as possible showing the block was made in error
• Submit detailed bank records, IDs, affidavits, and other documentation
• Explain in writing why the block violates your rights or is factually incorrect
• Research and cite legal precedents that support removing the block[1][2]
• Hire an experienced OFAC attorney to prepare the strongest case[3][4]

While the OFAC reconsideration process can be lengthy, overcoming an improper block is worth the time and effort. Temporary licenses only provide limited access to funds, so a successful reconsideration is the best long-term solution.

Be prepared for an extensive back-and-forth with OFAC to address any questions or concerns. Persistence and detailed evidence are key to getting an improper OFAC block rescinded. [5]

Some additional tips for navigating the reconsideration process include:

• Respond promptly and thoroughly to all OFAC information requests
• Ask your OFAC attorney to engage directly with regulators to expedite review
• Provide updated evidence if your circumstances change during the process
• Follow up regularly for status updates if the review is taking long
• Be prepared to appeal if your initial request is denied

With persistence and the right legal help, many improper OFAC blocks can be successfully overturned through reconsideration. But it does require dedication and an organized approach.

Additional Tips for a Successful Reconsideration

• Respond promptly and thoroughly to OFAC information requests
• Ask your attorney to engage directly with OFAC to expedite review
• Provide updated evidence if your circumstances change
• Follow up regularly on status if the review is lengthy
• Be prepared to appeal if your initial request is denied

Filing a petition for removal is the formal process for requesting reconsideration from OFAC[1]. Some key steps include:

• Submitting a written explanation of why the designation was made incorrectly
• Providing as much exonerating evidence as possible, like IDs and affidavits
• Making sure to respond thoroughly to any OFAC information requests[2]
• Asking an experienced OFAC attorney to engage directly with regulators[3]
• Being prepared for an extensive back-and-forth review process[4][5]
• Appealing the decision if your initial request is denied[6]

With a persistent, organized approach, many improper OFAC blocks can be successfully challenged. But it does require dedication and time to navigate the process.

Tips for Navigating the OFAC Reconsideration Process

Here are some additional tips for effectively navigating the OFAC reconsideration process:

• Carefully review the reconsideration procedures and requirements[1]
• Submit a written petition for removal that clearly explains the improper designation[2]
• Provide substantial exonerating evidence like IDs, affidavits, and records[3]
• Promptly and thoroughly respond to any OFAC information requests[4]
• Ask your attorney to engage directly with OFAC to expedite review[5]
• Follow up regularly on the status if the review is lengthy[6]
• Be prepared to appeal if your initial request is denied

Overturning an improper OFAC block takes time and dedication. But with persistence and organized preparation, many designations can be successfully challenged. It’s critical to understand the reconsideration process and proactively take the right steps.

Having an experienced OFAC attorney to guide you through the intricacies of the process can also greatly improve your chances of success. Don’t hesitate to get qualified legal help for navigating reconsideration requests and appeals.

Tips for Finding a Qualified OFAC Attorney

• Look for lawyers with specific experience handling OFAC cases[1]
• Find someone familiar with OFAC regulations and processes[2]
• Choose an attorney who regularly deals with OFAC[3]
• Ask about the lawyer’s track record with reconsideration requests[4]
• Make sure they have resources to handle the in-depth process[5]

When researching OFAC attorneys, be sure to[6]:

• Review their credentials and specialized training
• Ask about relevant experience and results
• Discuss their specific strategy for your case
• Get fee estimates and compare options
• Look for responsiveness and clear communication

Having the right legal expertise on your side can make all the difference during the complex OFAC reconsideration process. Do your diligence to find the most qualified counsel.