10 Keys to Getting Removed from OFAC’s SDN List
Being labeled a specially designated national (SDN) can have serious consequences for both individuals and organizations. As the Office of Foreign Assets Control (OFAC) explains, SDNs’ assets are “blocked,” meaning that they are subject to being frozen, and “U.S. persons are generally prohibited from dealing with them.” Since violating OFAC sanctions can also have serious consequences for U.S. citizens, businesses, and financial institutions, most will seek to avoid doing business with SDNs, and this can interfere with SDNs’ financial and commercial activities both in the U.S. and abroad.
While OFAC is aggressive in placing individuals and entities on the SDN list, it also recognizes that permanent placement on the list is often unwarranted. As a result, OFAC accepts requests for removal, and notes that “[e]ach year, [it] removes hundreds of individuals and entities from the SDN List.” These removals are based on “a thorough review by OFAC,” and its “rigorous review process . . . evaluates every request for removal individually on its merits and applies consistent standards to all of them.”
“Filing a successful request for reconsideration to secure removal from OFAC’s SDN list can be crucial for many individuals and organizations. While filing a successful request isn’t easy, there are clear procedures for doing so, and those that are willing to work with OFAC will be able to secure removal in many cases.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.
While there are clear procedures for requesting removal, getting removed from OFAC’s SDN list is not an easy process. Getting removed requires a strategic, proactive, and forward-thinking approach, and it also requires a willingness to work with OFAC as necessary. As a result, individuals and organizations seeking removal must ensure that they are prepared to do what is necessary throughout the process, and they should work with experienced counsel from the outset to maximize their chances of success.
What Are the Keys to SDN List Removal?
With these general considerations in mind, we can identify several strategic considerations for getting removed from the SDN list. For example, here are 10 non-exclusive keys to SDN list removal:
1. Conducting a Comprehensive Internal Audit
Making informed decisions about how (and whether) to file a request for removal from the SDN list (or “request for reconsideration”) starts with conducting a comprehensive internal audit. When contemplating a potential request for reconsideration, it is imperative that an SDN have a clear understanding of all relevant facts and circumstances. Among other things, this includes both (i) understanding the reason for OFAC’s designation, and (ii) understanding what grounds exist (if any) to seek removal.
A comprehensive internal audit conducted for the purpose of evaluating a potential request for reconsideration should focus on gathering all pertinent documentation. This includes documentation that is both helpful and harmful to the request, as informed decision-making requires knowledge of all pertinent facts and circumstances.
2. Identifying Applicable Grounds for Removal
After conducting a comprehensive internal audit, it should be possible to identify all applicable grounds for seeking removal from the SDN list. As identified by OFAC, these grounds may include:
- Mistaken identity;
- A “positive change in behavior;”
- The death of an SDN; or,
- The basis for the designation no longer exists.
Many requests for reconsideration are based on the last of these four grounds—that the basis for the designation no longer exists. If “the circumstances resulting in the listing no longer apply,” then an SDN is entitled to removal under 31 C.F.R. Section 501.807. However, requests based on mistaken identity are not uncommon; and, while the death of an SDN may justify a related individual’s or entity’s removal from the SDN list (or another OFAC sanctions list), a “positive change in behavior” can also be used as the basis for seeking termination of an individual’s designation as an SDN.
3. Changing the Circumstances that Resulted in the Listing (if Necessary)
While some individuals and organizations will have grounds to seek removal at the time that they first consider filing a request, others will have work to do. If an SDN has been properly designated and is still subject to listing under one or more of OFAC’s sanctions programs, then the SDN will need to focus its preliminary efforts on achieving a change in circumstances that justifies a request for removal.
These changes in circumstances can take various forms—and, once again, understanding why an individual or organization has been designated as an SDN is critical for determining what steps are necessary. Severing ties with other SDNs and unwinding transactions involving blocked assets are two examples of numerous possibilities, and it is critical that SDNs take the right steps when seeking the removal of OFAC sanctions.
4. Collecting All Pertinent Documentation
Seeking removal from the SDN list is not a simple matter of filing a request with OFAC (even though OFAC states that SDNs can “simply write to OFAC and request removal”). SDNs seeking removal must be able to convince OFAC that removal is warranted, and this involves submitting adequate supporting documentation, as discussed in greater detail below.
The first step toward submitting this documentation is to collect it. During the internal audit process, SDNs (or their legal counsel) should identify, catalog and preserve all relevant files, communications, and other documents so that they can be used efficiently and effectively during the request for reconsideration process.
5. Preserving the Attorney-Client Privilege
In parallel with identifying, cataloging, and preserving all relevant documents, SDNs (and their legal counsel) should also take the necessary steps to preserve the attorney-client privilege. Many documents collected during the internal audit process will likely be subject to the privilege, and SDNs must adequately preserve the privilege in order to avoid an inadvertent waiver. While SDNs seeking removal must be open with OFAC, they must also take adequate steps to protect themselves—and OFAC will understand (and expect) that SDNs have privileged documents and communications that they are unwilling to disclose.
6. Preparing the Request for Reconsideration
A request for reconsideration must include “a detailed description of why the listed person should be removed.” Using the information gathered through the internal audit process, SDNs (or their legal counsel) should carefully draft a petition that comprehensively addresses a specific justification for removal. Requests for removal should anticipate potential questions from OFAC and address these questions proactively. This will help streamline the post-filing process and improve the chances of an efficient and favorable result.
7. Preparing All Necessary Supporting Documentation
Another key step toward achieving an efficient and favorable result is to provide all necessary supporting documentation with the request for reconsideration. OFAC states that “[a]dditional information may . . . be submitted, such as arguments or evidence that establishes that an insufficient basis exists for the listing or that the circumstances resulting in the listing no longer apply.” It is generally best to provide this additional information proactively, as either: (i) OFAC will request it post-filing; or, (ii) OFAC will simply deny a request if it lacks a sufficient basis. The easier it is for OFAC to approve a request, the more likely an approval will be.
8. Being Prepared to Work with OFAC
Even when an SDN submits a comprehensive request for reconsideration with substantial supporting documentation, the SDN should still be prepared to work with OFAC as necessary. When evaluating requests, OFAC may request documents, issue questionnaires, and take various other steps to gather the information it needs to make a final decision. Once an SDN devotes the time, effort, and resources to submitting a request, the SDN should not abandon the process unless and until it becomes clear that OFAC will not issue an approval (and, even then, additional steps may be warranted).
9. Submitting Timely Responses to OFAC’s Requests
When going through the process of working with OFAC post-filing, SDNs should ensure that they submit timely responses to all of OFAC’s requests. Unnecessary delays will prolong the process, and OFAC notes that, “how timely and forthcoming the petitioner is in responding to [its] requests,” is a key factor in determining the overall duration of the process. OFAC also notes that “[i]ncomplete answers to questionnaires or incomplete documentation often cause delays;” so, while SDNs should respond in a timely manner, they should ensure that their responses are sufficient to address OFAC’s concerns as well.
10. Working with Experienced OFAC Sanctions Counsel
Due to the various challenges involved with submitting a successful request for removal from the SDN list (and the potential commercial, financial, and legal ramifications of remaining on the SDN list unnecessarily), individuals and organizations seeking removal should work with experienced OFAC sanctions counsel. By working with counsel from the outset, SDNs can ensure that they are making informed and strategic decisions throughout the process, and they can avoid mistakes that have the potential to lead to unnecessary delays and denials. Experienced counsel will also be able to communicate effectively with OFAC, address any questions that arise during the process, and help shepherd SDNs’ removal requests toward a favorable resolution.
Dr. Nick Oberheiden, founder of Oberheiden P.C., focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation.