This post is primarily directed to the members of the criminal defense bar that may be representing defendants who have been designated by the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) pursuant to the Foreign Narcotics Kingpin Designation Act (“Kingpin Act”). As those lawyers can attest, the provision of many legal services to such Specially Designated Narcotics Traffickers (“SDNTK”) is generally authorized by 31 C.F.R. § 598.507. However, payment for such services must be specifically licensed by OFAC. Those specific licenses for payment also always have reporting requirements contained in Section III(b) of the license.

These reporting requirements require that the licensee holders should file reports with OFAC on a periodic basis that identify the date of the receipt of funds, the amount of funds received from unblocked sources, and the source of those remittances. These types of reporting requirements are not uncommon and are typically found in OFAC licenses for receipt of payment for legal services from designated parties, or in the general licenses that have found their way into the regulations recently which permit receipt of such payments upon filing of an engagement letter with OFAC. For most sanctions programs, the requirement is that these reports are to be filed on a quarterly basis (See for example, 31 C.F.R. § 594.517; 31 C.F.R. § 537.528; 31 C.F.R. § 589.507). However, in specific licenses, issued pursuant to the Foreign Narcotics Kingpin Sanctions Regulations (“FNKSR”), 31 C.F.R. Part 598, for legal services rendered to parties designated under the Kingpin Act, the reporting requirement we’ve been seeing are on an annual basis, as opposed to quarterly.

This wasn’t always the case, however. Traditionally, those licenses issued under the FNKSR which authorized payment for legal services provided to SDNTKs required quarterly reporting. By my best estimate that all changed some time in 2014. Around that time, our firm started to notice that the licenses were requiring annual reporting as opposed to quarterly reporting, and it’s remained that way every since. Our firm has received around half a dozen or more such FNKSR licenses since that time, and they have all had the same annual reporting requirement. In addition, I have seen a number of other FNKSR legal services payment licenses issued to other firms, and also have all imposed annual reporting requirements.

Why do I point this out? Because I know that there are still some attorneys out there representing SDNTKs that are filing quarterly reports that may no longer need to do so. I wanted to point out this change in the reporting requirements so that they can check their own licenses to see if they now only need to report to OFAC annually. Also, I wanted to save OFAC the work of having to process quarterly reports for licensed transactions that only need to be processed annually. Finally, I wanted to do my part to save the environment from paper wasted on unnecessary reports. Although unusual in the sanctions realm, everyone wins as a result of these annual reporting requirements. Now if we could just get them for the other programs as well….

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