Banking & Financial Services Alert

The U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) has been busy of late. An update on the most recent slew of activity is as follows:

Amended Sudan General License: On April 15, 2013, OFAC issued a Sudan general license authorizing certain academic and professional exchange activities between the United States and Sudan, which are otherwise prohibited by the Sudanese Sanctions Regulations (31 C.F.R. Part 538).

On August 11, 2014, OFAC issued amended Sudan General License No. 1A (the “Amended General License”) which modifies the scope of the authorizations as follows:

  1. The Amended General License expands the definition of “U.S. academic institutions” to include their third-country branch campuses, and the authorizations for U.S. academic institutions as defined now include their contractors.
  2. The Amended General License authorizes U.S. academic institutions to engage in activities involving Sudanese nationals that are necessary for such nationals to apply to U.S. academic institutions and for authorized professional training seminars. Such activities may include accepting payments for tuition, admission application fees, and document certification or warehousing fees. U.S. academic institutions located in the United States may engage in transactions with Sudanese nationals authorized by this general license before a non-immigrant student visa is issued to such nationals.
  3. The Amended General License authorizes U.S. financial institutions to process transfers of funds by Sudanese nationals to pay fees and expenses (including tuition, living expenses, and enrollment fees) to enable Sudanese nationals to participate in authorized academic exchange programs (in the United States or at a third-country branch campus) or authorized professional training seminars.

Revised Guidance on Entities Owned by Persons Whose Property and Interests in Property are Blocked: Property blocked pursuant to an Executive order or regulations administered by OFAC is broadly defined to include any property or interest in property, tangible or intangible, including present, future or contingent interests. A property interest subject to blocking includes interests of any nature whatsoever, direct or indirect.

On August 13, 2014, OFAC issued guidance to replace its previous guidance posted in February of 2008 on entities owned by persons whose property and interests in property are blocked (the “Revised Guidance”). The Revised Guidance states that the property and interests in property of entities directly or indirectly owned 50 percent or more in the aggregate by one or more blocked persons are considered blocked regardless of whether such entities appear on OFAC’s Specially Designated Nationals and Blocked Persons List or the annex to an Executive order, and expands upon the earlier guidance by setting forth a new interpretation addressing entities owned 50 percent or more in the aggregate by more than one blocked person.

In summary:

  • Any entity owned in the aggregate, directly or indirectly, 50 percent or more by one or more blocked persons is itself considered to be a blocked person.
  • The property and interests in property of such an entity are blocked regardless of whether the entity itself is listed in the annex to an Executive order or otherwise placed on OFAC’s list of Specially Designated Nationals.

In issuing the Revised Guidance, OFAC noted its intent to incorporate this guidance into new regulations, and to amend existing regulations, in administering its sanctions programs. The Revised Guidance does not apply to all OFAC sanctions programs, however. For example, while OFAC also applies a 50 percent rule to entities on the Sectoral Sanctions Identification List (“SSI List”) created in July 2014 in the Ukraine-related sanctions context, a different, and more limited set of restrictions apply to those individuals on the SSI List. As a result, financial institutions may utilize the Revised Guidance to identify which subordinate entities are subject to the SSI List restrictions only, and must review the relevant Ukraine-related sanctions for other compliance purposes.

As financial institutions are aware, compliance with the regulations administered and enforced by OFAC is a complex undertaking requiring continuous and comprehensive efforts to ensure that policies and procedures are adequate and up-to-date. While OFAC’s issuance of the Amended General License and the Revised Guidance were likely issued with the intent of providing more certainty to financial institutions in connection with their OFAC compliance efforts, these developments have the potential to create new challenges for financial institutions seeking to maintain an adequate and comprehensive compliance program.

For more information regarding the General License or the Revised Guidance and their impact on financial institutions seeking to comply with OFAC regulations, please contact Greg Bader or Stephanie Quiñones.

See the Amended General License.
See the Revised Guidance.

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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.

Gunster, Florida’s law firm for business, provides full-service legal counsel to leading organizations and individuals from its 11 offices statewide. Established in 1925, the firm has expanded, diversified and evolved, but always with a singular focus: Florida and its clients’ stake in it. A magnet for business-savvy attorneys who embrace collaboration for the greatest advantage of clients, Gunster’s growth has not been at the expense of personalized service but because of it. The firm serves clients from its offices in Fort Lauderdale, Jacksonville, Miami, Orlando, Palm Beach, Stuart, Tallahassee, Tampa, The Florida Keys, Vero Beach and its headquarters in West Palm Beach. With more than 160 attorneys and 200 committed support staff, Gunster is ranked among the National Law Journal’s list of the 350 largest law firms. More information about its practice areas, offices and insider’s view newsletters is available at www.gunster.com.

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