OFAC Blocked Assets
OFAC blocked assets refer to the financial resources, such as bank accounts, real estate, and other tangible or intangible property, of individuals or entities that have been identified as engaging in or supporting illicit activities. These assets are blocked or “frozen” under various economic sanctions programs, rendering them inaccessible to their owners.
In effect, the blocked assets are isolated and removed from the global financial system, which can have a significant impact on the targeted parties’ ability to carry out their operations or finance their activities. This measure not only hampers the sanctioned parties’ financial resources but also serves as a signal to other entities to avoid conducting business with them.
What is OFAC Blocked Assets?
The Office of Foreign Assets Control (OFAC) is a part of the United States government that administers and enforces economic sanctions programs, primarily against countries and groups of individuals involved in terrorism, narcotics trafficking, or other illicit activities. One of the key components of OFAC’s sanctions regulations enforcement is the freezing of assets, or “blocking” of assets, of designated individuals or entities. This process is designed to deter illicit activities, deprive sanctioned parties of resources, and safeguard the United States financial system from being exploited by these parties.
Failure to comply with sanctions regulations imposed by the Office of Foreign Assets Control (OFAC) can have serious legal consequences. Both civil and criminal penalties may be imposed on individuals or entities that fail to block or freeze assets of designated persons, as required by OFAC sanctions regulations. These penalties can include hefty fines and, in some cases, imprisonment, depending on the severity of the violation and the intent behind it.
US persons, which includes citizens, residents, and businesses operating within U.S. jurisdiction, are legally obligated to comply with OFAC’s mandates. This includes blocking the property or interests in property of any Specially Designated National (SDN) as soon as they are listed, even if the transaction in question is completely unrelated to the reasons for the OFAC sanctions.
Every financial institution in the U.S. must also report such blockings to OFAC, ensuring that all economic activities involving SDNs are halted, regardless of their apparent legitimacy. These obligations exist even if the SDN has not been found guilty of any wrongdoing or has not had the opportunity to contest the designation.
What does it mean to be blocked by OFAC?
Under federal regulations, “blocked assets” refers to any property or assets in which a sanctioned country, entity, or individual holds an interest. OFAC blocked assets can include:
- Assets or funds owned or controlled by sanctioned individuals or entities
- Assets or funds where sanctioned parties have a 50% or greater ownership stake
- Assets or funds resulting from transactions with sanctioned parties
When the OFAC mentions “blocked” properties, it essentially refers to frozen assets. Examples of assets that may be blocked under OFAC sanctions include:
- Bank accounts or funds belonging to Specially Designated Nationals (SDNs) or those associated with a targeted government;
- Items, supplies, and goods directly or indirectly exported from the United States to a prohibited foreign country or its nationals;
- Items, supplies, or goods directly or indirectly imported into the United States that originate from a prohibited person or a targeted foreign country; and
- Any assets or property in the United States or U.S.-controlled areas belonging to an SDN or associated with a designated foreign government or SDN.
All persons, including financial institutions, in possession of property blocked under a sanctions program must report it. The reporting requirement is not limited to financial institutions that receive and block payments or transfers but applies to everyone who is required to block property. As stated in 31 C.F.R. § 501.603(a)(1), this requirement is mandatory and applies to all U.S. persons (or persons subject to U.S. jurisdiction) who possess or control any property or interests in property blocked according to OFAC sanctions program requiring blocking.
Role of OFAC Licensing and Compliance
OFAC license permits individuals or entities to engage in transactions that would otherwise be restricted under U.S. sanctions regulations. There are two main categories of licenses: general and specific.
A general license allows a specific type of transaction for an entire group of people without requiring each individual to apply. It covers a broad spectrum of transactions and provides automatic authorization for those meeting the criteria.
In contrast, a specific license is issued to an individual or entity following a formal application process. This written approval permits a particular transaction that otherwise falls under sanctions restrictions, tailored to the applicant’s request.
It is crucial for those conducting transactions under either a general or specific license to carefully follow all stipulations outlined in the license. Failing to adhere to these conditions may result in sanctions violations, exposing the individual or entity to legal consequences.
Additionally, OFAC regulations often include detailed statements outlining the agency’s licensing policies for certain types of transactions. These statements provide insight into transactions that align with U.S. foreign policy and national security goals. When such transactions have already undergone significant review, they are more likely to receive licensing approval from OFAC.
Application for the release of blocked funds
When submitting a license application under OFAC regulations, it’s essential to include all required details as outlined in the relevant guidelines or embargo program. The application should clearly describe the transaction, including the names and addresses of all parties involved.
To boost the chances of approval, provide detailed information and supporting documentation, referencing relevant OFAC regulations and licensing policies. Explaining how the transaction aligns with U.S. foreign policy or national security interests can also be beneficial.
Application for the release of blocked funds can be submitted electronically via OFAC’s website or by mail using the appropriate form. Including additional reasoning for why the funds should be released can strengthen the application.
Specific guidance for certain transactions may be found under the “Guidance on Licensing Policy” section of OFAC’s website, which can further improve the application.
Once submitted, OFAC reviews the application, with processing times ranging from a few weeks to several months. Applicants will be notified of the decision once the review is complete.
OFAC Blocked Assets: Current Prohibitions
Businesses, non-profits, and other organizations engaged in trade, commerce, or humanitarian activities with countries or individuals subject to sanctions must first confirm if their proposed transaction is restricted. After identifying any potential prohibitions, they should assess whether obtaining a specific license is necessary or if the transaction qualifies for coverage under an existing general license. This step is essential to ensure compliance with sanctions regulations and avoid unintended violations.
At present, OFAC-administered sanctions programs target the following countries: Angola, The Balkans, Belarus, Burma/Myanmar, The Ivory Coast/Cote d’Ivoire, The Central African Republic, Cuba, The Congo/Democratic Republic of Congo, Iran, Iraq, Lebanon, Liberia, Libya, North Korea, Russia, Sierra Leone, Somalia, Sudan/Darfur, South Sudan, Syria, Ukraine, Yemen, and Zimbabwe.
Moreover, sanctions target individuals and entities identified as Specially Designated Nationals due to their suspected involvement in or support of terrorism, international narcotics trafficking, or the proliferation of weapons of mass destruction.
How to Identify Blocked Assets and Properties?
Here are some key steps for identifying blocked property and assets:
- Regularly screen customers and transactions against OFAC Specially Designated Nationals (SDN) list. This list includes individuals, companies, and entities that are subject to sanctions, as well as their owned or controlled assets.
- Evaluate the ownership structure of businesses and entities you engage with. If a blocked person or entity holds 50% or more ownership in a company, their property and assets are considered blocked under OFAC regulations.
- Watch for red flags, such as payments or transfers that involve sanctioned individuals or entities, or transactions linked to high-risk regions with active sanctions. Be especially vigilant with transactions originating from or destined for sanctioned countries.
- Implement continuous monitoring of customer relationships and transactions. Situations can evolve, such as a new designation by OFAC, changes in ownership, or emerging sanctions risks.
- Investigate potential matches carefully. If a transaction or individual seems to align with a blocked party, gather all relevant details to confirm whether it’s a genuine match or a false positive before taking further action.
What to do if you find blocked property?
If you discover blocked property or transactions, follow these steps:
- Immediately freeze the assets or block the transaction. Ensure that the property is held in an interest-bearing account and prevented from being transferred, withdrawn, or used in any way.
- Report the blocked assets to OFAC within 10 days using the required forms and provide all relevant details about the blocked property or transaction.
- Cease any further unlicensed dealings involving the blocked property. All interactions or transactions related to the blocked assets must stop until proper authorization is obtained.
- Submit an annual report to OFAC by September 30th detailing any blocked property still under your control.
- The owner of the blocked property may apply for a specific license from OFAC to request the unfreezing of the assets. However, the blocked property remains frozen until OFAC grants a specific license allowing their release.
Financial Institutions and Credit Bureaus
Banks, mortgage lenders, and other credit-issuing entities are required to conduct due diligence to ensure that credit recipients are not subject to OFAC sanctions as Specially Designated Nationals or members or supporters of a targeted regime. Before extending credit or conducting financial transactions, failing to verify OFAC’s SDN list can result in blocked or suspended accounts, the imposition of reporting requirements, and civil and criminal penalties that may include multimillion-dollar fines and up to 20 years in prison.
Contact OFAC Sanctions Lawyers
Whether you need assistance with obtaining specific or general licenses, applying for SDN delisting, or seeking the release of blocked funds, our team of OFAC lawyers is here to guide you through the process. We specialize in handling complex sanctions regulations and ensuring compliance with OFAC’s requirements, helping to increase the likelihood of a successful outcome. Trust our expertise to navigate the intricacies of OFAC applications and protect your business interests. Reach out to us today for expert guidance on all OFAC-related matters.
OFAC Blocked Assets FAQ
To be blocked by OFAC means that an individual or entity is subject to economic sanctions due to involvement in or support of illicit activities such as terrorism, narcotics trafficking, or weapons proliferation. As a result, their assets are frozen, and they are prohibited from engaging in financial transactions with U.S. persons or within U.S. jurisdiction.
When funds are blocked by OFAC, they are effectively frozen, and the sanctioned individual or entity cannot access or utilize these funds. The funds are isolated from the global financial system, hindering the sanctioned party's ability to finance their operations or conduct business.
An OFAC sanctions check is the process of screening individuals or entities against the OFAC's list of Specially Designated Nationals (SDNs) and other sanctioned parties. It ensures compliance with U.S. regulations and helps prevent transactions with prohibited individuals or entities.
OFAC can block the assets of individuals, entities, or governments that are involved in activities contrary to U.S. foreign policy or national security interests, including those on OFAC's sanctions lists, such as the Specially Designated Nationals (SDN) list.
Yes, blocked assets can be released or unblocked if OFAC grants a specific license or determines that the reason for the blocking no longer applies. A formal request must be submitted to OFAC, including supporting information to justify the release.
Assets can remain blocked by OFAC indefinitely, as there is no set time limit for how long they can be frozen. They remain blocked until the sanctions are lifted, a specific license is granted by OFAC for their release, or the conditions that led to the blocking change. The duration depends on the nature of the sanctions and whether compliance requirements are met.
