The US Department of the Treasury’s Office of Foreign Assets Controls (“OFAC”) has issued a final rule (“FR”) amending its Reporting, Procedures and Penalties Regulations (the “Regulations”), which will be effective on November 7, 2024. Our previous blog detailing OFAC’s prior interim final rule (“IFR”) for these amendments is available here.
The FR will make only one amendment to the Regulations, which will expand the list of exclusions from OFAC’s blocked property reporting requirements. In addition to reports currently not being required in connection with authorized debits to blocked accounts for normal service charges, reports will also not need to be filed for:
- authorized transfers of funds or credit by a financial institution between blocked accounts in its branches or offices;
- blocked property that is unblocked or transferred pursuant to a general or specific license, unless the license includes a condition that requires the submission of an unblocking report; or
- blocked property that is unblocked pursuant to OFAC’s removal of a person from the SDN List.
In addition, OFAC published FAQ 1196, which provides guidance to persons who block or report property in error due to mistaken identity or typographical or similar errors. The FAQ states that such persons may unblock such property and file an unblocking report with OFAC consistent with the procedures described in 31 CFR 501.603(b)(3) and can cite FAQ 1196 as the legal authority under which the property was unblocked. Such persons may alternatively unblock the subject property through the “Compliance Release” procedure described in 31 CFR 501.806.
The FAQ indicates this Compliance Release procedure is solely for cases of mistaken identity or typographical or similar error, in which there was never a blockable interest in the subject property (e.g., a name match to a blocked person that the reporting organization later determines, with reliable supporting evidence, to be a false positive). The FAQ indicates the Compliance Release procedure should not be used in situations in which property was correctly blocked, but the status of the property has subsequently changed. Finally, the Compliance Release procedure is only available to persons who themselves blocked the property in error and cannot be invoked by others (e.g. it cannot be used by a third party whose property has been blocked by a financial institution).
The authors acknowledge the assistance of William Logsdon with the preparation of this blog post.