The Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued an interim final rule set to take effect in August, which amends the Reporting, Procedures, and Penalties Regulations (the “Regulations”) under 31 C.F.R. 501. The interim final Rule requires the electronic filing of specific submissions to OFAC and amends the reporting requirements related to blocked property and rejected transactions. OFAC also clarified several outstanding issues regarding the scope of the Regulations. Here are the highlights.
Electronic Filing
Starting in August OFAC will require the use of the OFAC Reporting System (“O.R.S.”) to submit initial reports of blocked property and Annual Reports of Blocked Property and reports of rejected transactions. Filers with unique or extraordinary circumstances preventing them from making electronic filings may call OFAC to request permission to submit reports by alternative means (subject to a presumption of denial). Information on how to register for O.R.S. is available on OFAC’s website.
Reports of Unblocked or Blocked Property
Historically, OFAC only required reports related to the “unblocking” of property at the specific request of OFAC. The Rule imposes a new reporting requirement for any blocked property unblocked or transferred. Reports of unblocked or transferred property must be made within ten business days via O.R.S. or email from the date of unblocking. For example, when a company receives an OFAC license when a bank erroneously blocks a permitted payment, the bank must file a report when the funds are unblocked. This reporting requirement also covers unblocked property under an order issued by a U.S. government agency or court. Additionally, OFAC extended the retention requirement for Annual Reports of Blocked Property to initial reports of blocked property.
Reports of Rejected Transactions
OFAC clarified several requirements for reports relating to rejected transactions where a transaction is not blocked but where processing or engaging in said transaction would still violate OFAC’s regulations. OFAC clarified that (1) securities, checks, foreign exchange, and the sales or purchases of goods or services are not considered a “transaction” under the Regulations and not subject to the reporting requirement where they are not provided as part of the rejected transaction; (2) the reporting requirement under the section applies to all U.S. Persons, including companies as well as banks; and (3) the information required in the report is limited to information the filer had available at the time the transaction was rejected.
Instructions to Report Certain Transactions
Banks may be required to provide reports on accounts or transactions that OFAC has reason to believe may involve the property or interests in property of a blocked person to aid OFAC in identifying blocked property. OFAC may issue instructions to banks that provide information or criteria regarding the blocked property and require banks to notify them before processing such transactions.