Sometimes forgotten in the long and growing list of Executive Orders directing sanctions to be imposed against various alleged bad actors, is Executive Order (E.O.) 13608 which prohibits certain transactions with, and suspends entry to, the United States of foreign sanctions evaders with respect to Iran and Syria. Just as the name suggests, E.O. 13608 targets for sanctioning those parties assisting in the evasion of sanctions targeting Iran or Syria. Where the name might confuse some people though, is that while it appears to be a routine sanctions program blocking the assets of its identified targets, it is actually not.
If an individual or company is listed under E.O. 13608 that identification does not serve to block any assets. However, a U.S. person may not provide or procure goods or services, including financial services, or technology to or from such listed person without authorization from the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC), unless the transaction is otherwise exempt from regulation under the International Emergency Economic Powers Act (e.g., certain travel-related transactions). As such, a U.S. financial institution must reject any wire transfer involving a listed person and file a report with OFAC within 10 days. If a financial institution is holding an account on behalf of a party designated under E.O. 13608 the account is not blocked; however, it is restricted and the financial institution cannot allow it to be operated without authorization from OFAC. Furthermore, property of a listed person is not blocked, but U.S. persons must have authorization from OFAC to provide or procure such property to or from a listed person, or to provide or procure services to or from a listed person in connection with such property.
Given all the executive orders out there, and the fact that most of the parties sanctioned under those executive orders all have their names included on the Specially Designated Nationals and Blocked Persons (SDN List) administered by OFAC, how is one supposed to know when to block a transaction vs. reject it? Well, it’s all in the language Treasury and OFAC use. If they are referring to a targeted party as an “identified” or “listed” party, then they are not subject to the blocking provisions, although U.S. persons may be prohibited from engaging in most transactions with them. If they are referred to as a “blocked” party, then obviously most transactions engaged in which that party are not only prohibited, by blockable if they do occur. Although, this is made in clear on OFAC’s Frequently Asked Questions webpage, it does seem to be a distinction that is lost on some compliance officers. Thus, it is important for compliance personnel to look beyond the screening software and the names on the list, and delve into what the executive orders and the press releases coming out from Treasury say in order to ensure they are not only complying with the sanctions, but that they are doing so in the appropriate manner.
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 firstname.lastname@example.org.