Banking and Finance Law Daily Wrap Up, BANK SECRECY ACT—OFAC issues interim final rule amending reporting requirements, (May 8, 2024)
Organizations Mentioned:Office of Foreign Assets Control | U.S. Department of the Treasury
By Sherri M. Schroeder, J.D.
The Treasury Department’s Office of Foreign Assets Control is amending the regulations to require electronic filing of certain submissions and is modifying certain reporting requirements related to blocked property and rejected transactions.
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has issued an interim final rule amending the reporting regulations found in 31 C.F.R. Part 501 (2024), which set forth standard reporting and recordkeeping requirements, license application procedures, and other procedures related to the economic sanctions programs administered by OFAC. Among other things, the new interim rule requires electronic filing through the OFAC Reporting System for submission of reports related to blocked property and rejected transactions, removes the mail option for certain other types of OFAC submissions, describes the type of reports OFAC may require from financial institutions for blocked transactions that meet specified criteria, and adds a reporting requirement for any blocked property that is unblocked or transferred. In addition, OFAC has clarified the scope of the reporting requirement for rejected transactions and modified the procedures for requests relating to property that is blocked in error. OFAC is also granting a 30-day period for public comment on the interim final rule.
Electronic filing. The new interim final rule generally requires filers to use OFAC’s electronic reporting system for submission of OFAC initial and annual reports of blocked property and reports of rejected transactions. OFAC is also amending several regulations to require electronic submissions and to remove options for mail submissions of certain other reports to allow for more efficient receipt and processing of reports and requests from the public.
Unblocked/transferred blocked property. To allow OFAC to ascertain the current status of blocked and unblocked property, OFAC is requiring electronically submitted reports within 10 business days of when blocked property is unblocked or transferred. In addition, initial reports of blocked property will now have the same retention requirement as annual reports of blocked property.
Rejected transaction reports. In response to public comment, OFAC has clarified 31 C.F.R. § 501.604(a) (2024) to further define the scope and types of rejected transactions that need to be reported to OFAC by non-financial institutions. Because public comments noted that not all information required by OFAC may be readily available at the time a transaction is rejected, OFAC has clarified in 31 C.F.R. § 501.604(b) (2024) that such information must be reported only to the extent the information is available at the time the transaction was rejected.
Blockage due to mistaken identity. OFAC revised 31 C.F.R. § 501.806 (2024) for requesting release of funds blocked due to mistaken identity to extend to a broader category of any property blocked due to typographical or similar errors. OFAC also narrowed the procedures so they are available only to the person that mistakenly blocked the property.
FOIA. OFAC has updated the rules governing availability of information under the Freedom of Information Act (FOIA) for certain categories of submitted information to clarify that such information is generally protected from disclosure if OFAC determines that an exemption or exclusion under FOIA applies or the disclosure is otherwise prohibited by law.
Delisting. OFAC clarified that a person may submit a petition for administrative reconsideration to seek removal of a person or property from any OFAC-maintained list of sanctioned persons; this must be done by email.
Identification of blocked property. If OFAC has reason to believe an account or transaction may involve the property or interests in property of a blocked person, OFAC may instruct the financial institution to report transactions that meet specified criteria and to notify OFAC prior to processing such transactions. A note added to 31 C.F.R. § 501.602 (2019) describes the reports and information OFAC may require.
Other changes. OFAC also updated the reporting instructions to require use of the relevant OFAC Reporting System (ORS) identification number in certain instances, when available. OFAC website links were also updated.
Effective date, comments. Requirements under the new interim final rule take effect Aug. 8, 2024. Comments may be submitted on or before June 10, 2024.
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