On February 20, 2020, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) published two new Frequently Asked Questions regarding the interim final rule of June 21, 2019 that amended the Reporting, Procedures and Penalties Regulations, 31 CFR Part 501 (the “RPPR Rule”). These FAQs hope to clarify some of the issues that arose from the interim final rule but still leaves areas of uncertainty, such as what constitutes a rejected transactions. For example, if a company receives an order request from Iran and simply ignores it, is ignoring it considered a rejection subject to the reporting requirements? Our previous blog post on the RPPR Rule is available here.
The new FAQs (i.e., FAQs 819 and 820) confirm that:
- All US persons and persons otherwise subject to US jurisdiction (“Persons Subject to US Jurisdiction”)–and not only US financial institutions–are required to report rejected transactions to OFAC within 10 business days of the rejected transaction and to otherwise comply fully with the RPPR reporting requirements. Prior to the RPPR Rule, only US financial institutions had been required to report rejected funds transfers to OFAC.
- OFAC expects Persons Subject to US Jurisdiction to provide in the rejected transaction report all the required information that is in the filer’s possession. At a minimum, OFAC would expect that information to include information regarding the filer of the report, the date the transaction was rejected, the legal authority or authorities under which the transaction was rejected, and any relevant documentation received in connection with the transaction. OFAC does not, however, expect the filer to contact the counterparty to the rejected transaction in order to obtain additional information not in the filer’s possession.
The FAQs do not clarify when and how the reporting requirement is triggered but note that OFAC continues to review comments regarding the reporting requirement to assess whether any clarification or modification to the rule would be appropriate. In this regard, OFAC would particularly welcome comments regarding the following:
- information regarding the business impact of this rule;
- examples of rejected transactions that are proving challenging to report;
- the quantity of rejected transactions; and
- the types of information in the filer’s possession for a rejected transaction report.