May 2, 2017 [updated May 16, 2017]
By Anna Sayre, Legal Content Writer, SanctionsAlert.com
On April 20, 2017, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a new page of frequently asked questions (FAQs) regarding petitions for removal of Specially Designated Nationals (SDNs) from OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List).
The new FAQs do not change, nor make the removal process easier, but rather summarize, long-standing OFAC policies.
Being Listed
Being placed on an SDN or other OFAC sanctions list is not a small matter. All ‘U.S. persons’ are prohibited from engaging in transactions or conducting business with an SDN or any company of which it owns 50 percent or more. Under OFAC regulations, U.S. persons include all U.S. citizens and permanent resident aliens regardless of where they are located, all persons and entities within the U.S., as well as all U.S. incorporated entities and their foreign branches. Further,any property, money, or account held within the U.S. and its territories, or that enter into the U.S. becomes blocked, or “frozen” as long as an entity remains on the SDN List.
Individual and entities that are sanctioned will also be placed on OFAC’s SDN and other sanctions lists.Sanctioned are typically implemented under a particular executive order, such as Executive Order (E.O.) 13382 covering proliferation of WMD, under which there are several prongs. The activities and behavior covered under this E.O. are different than those under, for example, E.O.13224, which covers terrorism. Additionally, OFAC issues a public press release detailing why the entity was designated, which outlines the behavior that caused the listing.
How to Be De-listed
On the U.S. Treasury’s website, OFAC states that it has a “willingness to remove persons from the SDN List consistent with the law” and that “[t]he ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior”. This suggests that if there has been some improvement in the SDN’s behavior, which caused the initial listing,then OFAC will remove the designation.
In addition to a positive change in behavior, examples of situations that may result in delisting include:
- The death of an SDN;
- The basis for the designation no longer existing; or
- When a designation was based on mistaken identity.
It is not uncommon for individuals or entities to be delisted, but there is little public information about exactly why an entity is delisted. OFAC will simply putout a general public notice on its website announcing that a name has been removed.
“In practice, it happens probably most commonly in the Kingpin Act context, when people show that they’re no longer connected with, for example, a money laundering front. You’d have to look for news reports where people give an interview, because none of these cases are public,” says Peter Jeydel, an attorney at Steptoe & Johnson in Washington D.C.
In recent times, OFAC has begun to delist SDNs more frequently. One of the largest delisting actions happened in 2014 when OFAC removed the names of 308 individuals and entities formerly associated with the then-defunct trafficking empire known as the Cali Cartel.
Summary of OFAC’s New ‘FAQ’s
In its new page of numbered FAQs,OFAC addresses four main issues:
- How to file a request for removal: OFAC states that this can be done by “simply” writing to them and requesting one, and then lists an address and a few items that should be included in the request. Also, one may “reapply using the same process as for the original petition” as long as “new arguments and evidence” are presented.
- Hiring an Attorney: OFAC makes a point of suggesting that there is no need to hire an attorney in order to file a petition. However, if an attorney is desired, that “attorney must apply for a specific license from OFAC Licensing”.
- Length of Removal Process: OFAC explains that the process “depends upon a range of factors”. It states that OFAC will send a questionnaire within “90 days” from the petition, but caveats this by saying that there may be a number of questionnaires needed before a decision is made.
- Reason for Listing: OFAC says that it “draws on information from many sources, including but not limited to relevant United States government agencies, foreign governments, United Nations expert panels, and press and other open source reporting” in order to make a listing determination.
The FAQs apply to any OFAC sanctions list, including the SDN list.
For the full OFAC FAQs regarding the filing of Petitions for Removal, click here.
The True Complexities of Removal
Removals are well known to be difficult to obtain, and the process for removal can be very lengthy.
A removal effort often starts with an “administrative reconsideration” submitted in writing to OFAC pursuant to 31 CFR Section 501.807. The listed person may submit arguments or evidence showing that insufficient basis exists for the designation. He or she also may propose remedial steps, such as corporate reorganization, resignation of persons from positions within a blocked entity, or similar steps, which the person believes would negate the basis for designation.
There is no “standard” administrative reconsideration. A delisting must respond to the unique considerations that gave rise to the designation.Further, individuals and entities that are sanctioned have generally committed serious offenses (i.e. supporting terrorism, proliferation, drugs, organized crime, etc.). A such, a sanctions investigation can take years to develop, mainly due to the fact that a sanctions investigator must develop an evidentiary record, which must hold up in court if challenged. These legal packages are reviewed by multiple legal layers to include but not limited to Treasury General Counsel, Department of Justice and Department of State General Counsel.
A “OFAC Licensed” Attorney
As stated in the new FAQs, a license from OFAC is required to authorize payments to an attorney.
“It is generally not difficult to obtain a license to represent an SDN”, says Ms. Roberts. Mr Jeydel adds that, “these licenses tend to take just 2-3 months or so, but you have to know how to draft the application, and provide all the information they’ll need right up front.”
On the other hand, such licenses sometimes come with certain onerous provisions and reporting obligations. For example, OFAC may require proof that payments from an SDN were not made with proceeds of criminal activity.
Length of Removal
It can take several years to build a case and go through the process of removal. This can be down to a lot of back and forth correspondence, gathering of documentation during the ‘discovery’ period, as well as preparing for an OFAC interview.
Mr. Jeydel says that, “it can be as quick as a year or two, but often takes many years. 4-5 years is not uncommon at all; it can be a very intensive process”, he adds. Mr Jeydel explains that this is because it is “typically very difficult to get delisted and OFAC will dig deeply into the facts and hold you to a high standard, depending on the case. They typically require credible documentary evidence proving whatever point you’re trying to make, which can be challenging to obtain. There’s often a back-and-forth of multiple questionnaires and responses from OFAC, with several months between each questionnaire.”
Michelle Roberts, an attorney at Berliner Corcoran & Rowe’s D.C. offices, states that these new FAQs “don’t really change anything or make anything easier. As a practical matter, it is very difficult to be removed from the list.”
OFAC’s Global Targeting
Maintaining the integrity of U.S. sanctions is a high priority for OFAC and is the driving principle behind a rigorous review process that takes place in the Office of Global Targeting. OFAC evaluates every request for removal individually on its merits and applies consistent standards to all of them.
“Global Targeting is the biggest component of OFAC. They get many requests and they take long to work on. It is something that OFAC takes very seriously and is genuinely engaged on,” says Mr. Jeydel.