Today, the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced the designation of two individuals and one entity to the List of Specially Designated Nationals and Blocked Persons (“SDN List”). Those designated by today’s actions include members of the Japanese criminal organization Yakuza and an organization that is believed to be part of the larger Yakuza organization. As with most OFAC designations, U.S. persons are prohibited from engaging in transactions with these newly designated parties and any assets they have under U.S. jurisdiction are to be blocked while the designation remains in place. The individuals designated as part of today’s actions include, 68 year-old Harekai Fukuda and 82 year-old Shigeo Nishiguchi, both accused of being involved in Yakuza’s sex trafficking operations.

The Transnational Criminal Organizations (“TCO”) Sanctions Regulations, borne of Executive Order (E.O) 13581, is a relatively new sanctions program that was issued a little over a year ago and has increasingly been used by OFAC to designate parties involved in a variety of criminal activities. However, little more is known about the program outside of the bare bones regulations that have been promulgated at 31 C.F.R. Part 590. Even OFAC’s “What You Need to Know About Sanctions Against Transnational Criminal Organizations” document found on their website is fairly sparse on information, stating in only a few paragraphs what the prohibitions and the penalties are. As such, it is not the most telling document in terms of how to deal with specific types of complicated transactions with those designated under E.O. 13581 or entities or persons controlled by those designated. Perhaps further guidance will come in time.

I have wondered for a while whether or not the TCO Program would be used in place of the Foreign Narcotics Kingpin Designation Act (“Kingpin Act”) sanctioning authority, which is OFAC’s most fluid program and their seemingly go to program when it comes to targeting narcotics traffickers. Thus far, it seems that it is being used to designate those parties involved in other types of criminal activity as well as narcotics trafficking. I’m not sure why OFAC would choose to exercise their designation authority in this way as the Kingpin Act is a much more rigid designation authority that precludes judicial review and disclosure under the Freedom of Information Act of information utilized in the designation.

Thus far, there have been 27 designations under the TCO and only two of those are also designated under the Kingpin Act. For those designated under the TCO program alone, they would be wise to begin the reconsideration process now, because if they are also tagged with a Kingpin designation the reconsideration process will become all the more difficult.

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@ferrari-legal.com.