Office of Foreign Asset Control—Specially Designated Nationals Lists
Deep within the Treasury Department, there is a little known but extremely powerful organization known as the Office of Foreign Asset Control (“OFAC”). Beginning in the 1930’s with the passage of the International Emergency Economic Powers Act (“IEEPA”), Congress authorized the President, by executive order, to impose sanctions on foreign nations, organizations and individuals for engaging in conduct detrimental to American interests. Since then, other statutes have followed and expanded the scope of Presidential power.
There are multiple sanctions programs administered by OFAC at any given time. These sanctions are frequently aimed at countries but can also be directed toward specific individuals and organizations such as terrorists, narcotics traffickers and money launderers. OFAC creates a list of individuals and entities for each program. Individuals appearing on any of the lists are referred to as Specially Designated Nationals (“SDN”).
How is someone placed on a SDN List?
The system for placing entities on an SDN List is opaque. OFAC does not publish the criteria it uses or the evidence it relies upon. Lists are created by the Treasury Department with input from the State Department. Classified information may be used to determine if someone should be placed on a list. This information may not be reliable. Sometimes, merely having the wrong name may be sufficient to be placed on a list. In many cases, people placed on the list do not know why they were placed on a list. Even U.S. citizens are placed on SDN lists.
Unlike criminal or most civil proceedings, there is no “notice” to an individual or entity under consideration for placement on a list. There is also no administrative hearing before someone or an entity is placed on a list. The first hint of an issues will likely come from a payment being blocked by a U.S. bank or the inability to use an ATM card.
What are the consequences of being placed on a SDN List?
There are significant differences between how the different lists are administered, but generally speaking, American entities and individuals are prohibited from transacting business with anyone on any SDN List, but there are exceptions. The consequences of being place on a SDN List are devastating—it frequently destroys businesses and organizations and ruins people lives.
What can be done if an individual or entity’s name appears on a SDN list?
It is possible to have a name removed from the SDN List. If a payment has been intercepted or frozen by an American bank, it may be possible to unfreeze the payment. There are a variety of general licenses for conducting business with sanctioned entities, and it may be possible to obtain a “Special License” to conduct transactions under certain circumstances. If an American organization or individual has violated IEEPA, it may be possible to mitigate damages or culpability through a Voluntary Self-Disclosure.
In the right circumstances, it may be possible to sue OFAC for violating a company or individual’s due process rights under the U.S. Constitution. The Administrative Procedures Act (“APA”), for example, prohibits federal agencies, like OFAC, from engaging in conduct that is arbitrary, capricious or contrary to law. This is a high standard for any plaintiff to meet, but there have been cases where OFAC has been sued and has settled with plaintiffs before courts could render authoritative decisions. Depending on the facts of a particular case, a suit against OFAC may be warranted.
At Boyle Frost, we represent companies and individuals within the full range of OFAC issues. We conduct investigations internationally to determine if sanctions have been violated and assist with the creation of compliance and mitigation measures to limit any damages that may have occurred. We work to obtain Special Licenses to allow clients and engage in transactions that would otherwise be prohibited and to clear transactions that have been frozen. We represent entities who seek to be removed from a SDN list. If a violation has occurred, we may assist with a Voluntary Self Disclosure.
These issues may seem complex and the challenges daunting, but we know how to handle them. Give us a call or contact us today.