1. What is the Office of Foreign Assets Control?
The Office of Foreign Assets Control (OFAC) operates within the U.S. Department of the Treasury. OFAC administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the U.S.
OFAC acts under Presidential national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze assets under U.S. jurisdiction. Many of the sanctions are based on United Nations and other international mandates, are multilateral in scope, and involve close cooperation with allied governments.
2. Who must comply with OFAC regulations?
All U.S. persons must comply with OFAC regulations, including all U.S. citizens and permanent resident aliens regardless of where they are located, all persons and entities within the U.S., and all U.S. incorporated entities and their foreign branches.
3. What are “prohibited transactions”?
By enforcing the necessary economic and trade sanctions, OFAC restricts prohibited transactions. OFAC defines a “prohibited transaction” as a “trade or financial transaction and other dealing in which U.S. persons may not engage unless authorized by OFAC or expressly exempted by statute.” OFAC is largely responsible for investigating the “prohibited transactions” of individuals, organizations, and companies who operate in foreign nations. OFAC also has the ability to grant exemptions for prohibited transactions on a case-by-case basis.
4. What are OFAC’s investigation powers?
OFAC investigation tools include administrative subpoenas. They allow OFAC to order individuals or entities to keep full and complete records regarding any transaction engaged in, and to provide these records if requested. OFAC’s director may hold hearings, administer oaths, examine witnesses, take depositions, require testimony, and demand the production of any books, documents, or relevant papers relating to the matter of investigation. Once OFAC has issued an administrative subpoena, the addressee must respond in writing within thirty days.
5. How much are the fines for violating these regulations?
The fines for violations can be large. Depending on the program, criminal penalties can include fines from $50,000 to $10,000,000 and imprisonment from 10 to 30 years for willful violations. Depending on the program, civil penalties range from $250,000 or twice the amount of each underlying transaction to $1,075,000 for each violation.
6. Are there exceptions to the prohibitions?
Yes. OFAC regulations provide for the granting of licenses. A license is an authorization from OFAC to engage in a transaction that otherwise would be prohibited. There are two types of licenses: general licenses and specific licenses.
A general license authorizes a particular type of transaction for a class of persons without the need to apply for a license. A specific license is a written document issued by OFAC to a particular person or entity, authorizing a particular transaction in response to a written license application. Persons engaging in transactions pursuant to general or specific licenses must make sure that all conditions of the licenses are strictly observed. OFAC’s regulations may contain statements of OFAC’s specific licensing policy about particular types of transactions.
This post gives information only, not legal advice. If you have a legal problem or need legal advice, you should speak to a lawyer.For more information about OFAC regulations and guidance on how to apply for a specific license, please feel free to contact us.