OFAC Clarifies Reporting Requirements for Transactions and Blocked Property

The Office of Foreign Assets Control (OFAC) has recently provided guidance on reporting requirements for transactions and blocked property under the Reporting, Payments, and Use of U.S. Currency (RPPR) rule. This clarification aims to help companies navigate the complex regulatory landscape and avoid heightened enforcement risk.

Declining Transactions: A Nuance in Compliance

One key takeaway from the notice is that declining to proceed with a transaction in the first place may not necessarily be considered “rejecting” a transaction for reporting purposes. Industry experts argue that this nuance could significantly impact how businesses approach compliance with the rule, which aims to prevent U.S. dollars from being used to facilitate illegal activities.

Revised Definition of a Transaction

The notice amends the definition of a “transaction” to include wire transfers and trade finance, but clarifies that only transactions related to securities, checks, foreign exchange, goods, or services require reporting. This clarification may help alleviate some of the burdens associated with compliance, but many questions remain unanswered.

Reporting on Transfers and Unblocking of Blocked Property

OFAC has clarified that reports must be filed when blocked property is transferred or unblocked, unless a specific license requires otherwise. However, debits to blocked accounts for normal service charges authorized by OFAC do not require reporting.

Expanded Authority to Restrict and Report Potentially Blocked Property

OFAC has expanded its authority to restrict and require reporting on potentially blocked property. The agency can now provide information or criteria to aid in the identification of blocked property, and may issue proactive notifications to financial institutions more frequently.

Revised Procedures for Releasing Funds Blocked Due to Mistaken Identity

The notice also revises procedures for requesting the release of funds blocked due to mistaken identity, extending them to include property blocked due to typographical or similar errors leading to blocking.

Conclusion

As companies strive to navigate these complex regulations, it is crucial to ensure compliance with the RPPR. Failure to do so may carry heightened enforcement risk. For more information on how the RPPR applies to your business, contact a member of the Steptoe sanctions team.

Key Takeaways:

• Declining to proceed with a transaction does not necessarily mean “rejecting” it for reporting purposes.
• Wire transfers and trade finance are now included in the definition of a transaction.
• Reports must be filed when blocked property is transferred or unblocked, unless a specific license requires otherwise.
• OFAC has expanded its authority to restrict and report potentially blocked property.
• Procedures for releasing funds blocked due to mistaken identity have been revised.