If you’re on the United States Department of the Treasury’s Office of Foreign Assets Control’s (OFAC) email subscription list, then you’ve probably seen all of the recent general licenses that have been issued authorizing certain transactions with parties that are otherwise blocked in Panama as a result of the designation of the Waked Money Laundering Organization (MLO) under the Foreign Narcotics Kingpin Designation Act (“Kingpin Act”). While these general licenses may not be terribly interesting to those who don’t have any transactions or relationships with those entities the general licenses address, they have led to the issuance of some Frequently Asked Questions (FAQs) by OFAC. Here at SanctionLaw, we love FAQs and the publication of interpretive guidance letters (despite our recent post about some of those letters being outdated). Thus, we’ve been very happy to see that OFAC is growing increasingly comfortable with issuing such FAQs.

The reason we’re so passionate about FAQs is because they often provide insight and clarification on issues in which there may not be a consensus amongst practitioners, and because they often offer a window to how OFAC looks at certain issues. Today, OFAC issued another general license under the Kingpin Act in relation to the Waked MLO designations–General License 7 Authorizing Certain Transactions and Activities Related to Importadora Maduro, S.A., Maduro Internacional, S.A., and Lindo & Maduro, S.A. The license authorization itself was fairly straightforward–authorizing U.S. persons to engage in all transactions and activities necessary to 1) maintain operations or 2) facilitate, negotiate, or agree to the sale, disposition, or transfer of Importadora Maduro, S.A.; Maduro Internacional, S.A.; and Lindo & Maduro, S.A. (referred to as “Felix Maduro Group”). However, the FAQ issued alongside this new general license had an interesting note. That note repeated language found in 31 CFR § 598.408 concerning the fact that evidence relied upon by an Specially Designated National (SDN) to show a change of ownership or control–and therefore grounds for a removal the designation–has to “conclusively demonstrate” that all ties with SDNs have been completely severed.

What’s so interesting about a regulation that’s been on the books for a while being incorporated into an FAQ? From my perspective it highlights the duality of standards OFAC deploys in its designations and reconsideration processes. The fact is that when determining whether a company should be designated under a sanctions authority, OFAC only needs a reasonable cause to believe the company is owned or controlled by an SDN. However, if an SDN wants to demonstrate to OFAC that the SDN is no longer owned or controlled by an SDN, and thus should be delisted, such a demonstration must be convincingly made. In short, OFAC doesn’t need a strong basis to designate an entity, but they need convincing evidence to be delisted.

This post is not intended to ridicule OFAC, or to state that the differing standards are not warranted. It is merely to note one of the challenges SDNs face in the reconsideration process. While OFAC’s burden for designation is rather low– and can be met by relying upon a variety of sources, including hearsay materials–an SDN needs to gather and produce concrete evidence and documents to support its claim that OFAC either made a mistake, or there have been a change in circumstances warranting removal. Anything else would be unconvincing.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com