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Permitted Dealings with Blocked OFAC Parties
Permitted Dealings with Blocked OFAC Parties
Being blocked by OFAC can be a confusing and stressful situation for many individuals and companies. However, there are some limited dealings that are permitted with blocked parties under OFAC regulations. This article will explain what it means to be blocked, how you can check if you’re dealing with a blocked party, and what types of transactions are allowed.
What Does It Mean To Be Blocked By OFAC?
OFAC, or the Office of Foreign Assets Control, is a U.S. Treasury department that administers and enforces economic and trade sanctions. These sanctions are based on U.S. foreign policy and national security goals against targeted foreign countries, terrorists, international narcotics traffickers, and more. OFAC maintains a list known as the Specially Designated Nationals (SDN) list, which includes individuals and companies owned or controlled by, or acting for or on behalf of, sanctioned parties[6].
When a party is added to the SDN list, their assets are “blocked” under U.S. jurisdiction. This means that U.S. persons and companies are generally prohibited from dealing with them. Blocked parties are also referred to as “sanctioned” parties. Some of the implications of being blocked include[3]:
- Assets blocked – assets and property are frozen
- Transactions prohibited – U.S. persons cannot transact or deal with blocked parties
- Travel restricted – blocked individuals may be denied U.S. visas or entry
- Reputation damaged – being sanctioned carries a stigma
As you can see, being added to OFAC’s list comes with severe restrictions and consequences. However, U.S. persons are not completely prohibited from any dealings with blocked parties, as we’ll explore next.
How To Check If A Party Is Blocked
Before transacting or dealing with any foreign individual, company, or entity, it’s important to screen them against OFAC’s SDN list. This helps ensure you don’t inadvertently violate OFAC regulations. There are a few ways to check if a party is blocked[3]:
- Search OFAC’s SDN list manually on their website
- Use a third party OFAC compliance screening tool
- Screen transaction data directly against OFAC’s downloadable SDN list
OFAC makes the SDN list downloadable so that companies can integrate it into their compliance procedures. If you get a potential match, it’s important to verify it is an actual match rather than a false positive. OFAC recommends several steps to validate SDN matches[4]:
- Check for spelling differences or special characters
- Compare addresses, dates of birth, etc.
- Check for partial matches – names or companies that closely resemble SDNs
- Verify country and cities match sanctioned jurisdictions
Validating matches helps avoid blocking transactions unnecessarily. If you determine it is a valid SDN match, you’ll need to comply with OFAC regulations on dealings with blocked parties.
Permitted Dealings with Blocked OFAC Parties
U.S. sanctions generally prohibit transactions involving blocked persons, even indirectly. However, OFAC does outline some scenarios in which U.S. persons can deal with blocked parties[3]:
1. Petitioning to Unblock Funds
If you block a transaction because it involves a blocked party, you can request OFAC to reconsider and authorize the funds to be released. The blocked party can also petition OFAC directly to be removed from the SDN list. The procedures are outlined on OFAC’s website[6]. However, approval is not guaranteed.
2. Legal Services
U.S. persons can provide certain authorized legal services to or on behalf of blocked individuals and entities. This includes representation for legal proceedings or advising on legal rights and responsibilities. However, legal services cannot involve providing financial, economic, or trade services to blocked parties.
3. Emergency Medical Services
U.S. healthcare providers and institutions can offer certain medical services to blocked parties on a case-by-case basis with prior approval from OFAC. This includes services for serious or life-threatening medical conditions.
4. Personal Communications
U.S. persons can engage in personal communications with blocked individuals such as family members, provided there are no financial transactions. Certain gifts valued under $100 are also permitted on special occasions like birthdays, weddings, births, etc.
5. Information Materials
U.S. persons can share and export information materials including books, magazines, films, photographs, etc. to blocked parties. This allows for the exchange of ideas and information.
Any dealings outside of these exceptions require explicit authorization from OFAC. The permissions are narrow in scope – working with blocked SDN parties is very limited. Next we’ll go over some tips for mitigating risk.