4 Things to Know About the OFAC Clearance Process - Federal Lawyer
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4 Things to Know About the OFAC Clearance Process

OFAC Transaction Blocking and Rejection Compliance

Getting cleared from the Specially Designated Nationals (SDN) list maintained by the Office of Foreign Assets Control (OFAC) at the U.S. Department of the Treasury is essential for sanctioned individuals. If you or your company has been targeted for U.S. economic sanctions, it is unlikely that you will be removed from the list of sanctioned parties without petitioning for it.

As Dr. Nick Oberheiden, founding partner of the national defense firm Oberheiden P.C. and OFAC clearance lawyer, readily admits, getting cleared from U.S. economic sanctions is neither easy nor as straightforward as OFAC lets on.

Here are four things that he thinks you should know about the process.

1. You Generally Have a Right to a Lawyer for the Clearance Process

One concern that sanctioned parties frequently have is whether they would be violating sanctions if they hire a lawyer to help them clear their names from the SDN lists. After all, U.S. economic sanctions penalize American persons who do business with people or entities on the SDN lists, deterring them from getting involved with the subjects of the sanctions.

Generally, though, OFAC includes a general license in its sanctioning imposition that allows the target of the sanctions to get legal representation for a variety of issues, including for the clearance process. This allows an OFAC lawyer or law firm to get paid for the services that it provides, even though the client is the subject of American economic sanctions.

2. The Clearance Process is Much More Difficult Than OFAC Lets On

On its page concerning the clearance process, OFAC claims that it removes “hundreds of individuals and entities from the SDN List” each year, and that petitioners who want to request their removal from the list of sanctioned parties do not need the help of a lawyer. According to OFAC, the process is as easy as can be: “simply write to OFAC and request removal.”

Taking them at their word is almost guaranteed to result in a denial of your petition.

The act of actually filing the petition for removal from the SDN list should only serve as the culmination of a long process of fact-gathering and brainstorming.

This starts with determining, with precision, exactly why you were put on the SDN list in the first place. If OFAC issued a press release concerning your addition, that is a good place to start. However, it is generally a good idea to send a Request for Administrative Record to OFAC to get the evidentiary memos that supported the agency’s decision to add you to the list. While confidential evidence will be redacted, you can still get important details as to why you are an SDN.

This information lets you decide what will be the best arguments to present to get you off the SDN list. Broadly speaking, there are seven grounds for getting cleared from OFAC’s lists of sanctioned individuals. Some of these come from 31 C.F.R. § 501.807, the regulation that governs the clearance or removal process, while others come from less formal OFAC guidance and past cases:

  1. The original reasons for your inclusion on the SDN list were insufficient
  2. The original justification for the sanctions no longer applies
  3. You can take remedial action that would make the sanctions unnecessary
  4. The sanctions against you are a result of mistaken identity
  5. You have sold or divested from the company or association that led to your sanctions
  6. The associate that led to your sanctions has died
  7. Your good behavior during your period under sanctions justifies their removal

The clearance process is a long one, and prone to delays if your first petition for removal is not sufficient. Throughout that process, you will still be subjected to economic sanctions that can cripple your finances. Getting it right the first time is essential.

3. The Clearance Process Can Take Years

Unfortunately, though also understandably, OFAC takes a long time to decide whether to remove a party from economic sanctions or not. These sanctions are serious, and targeted parties frequently make whatever claims they think will work to get them removed, no matter how truthful they are. Because of this, OFAC will not take you at your word when you file a petition for clearance or removal. Everything you say will be subjected to close scrutiny by the agency – a level of scrutiny that prolongs the process.

At best, a petition for clearance that is thorough and persuasive will still generally take around six months before OFAC removes the sanctions that it has imposed on you or your company.

However, if your petition for clearance is inadequate or leaves doubts or questions open to interpretation, OFAC will respond with a questionnaire that lists the information that it still requires before making a determination on your petition. Gathering that information and responding to the questionnaire in a way that best advances your interests can take weeks. Once received by the agency, it can take another 90 days for the questionnaire to get processed. If OFAC still has questions, there will be another round of questionnaires to handle, delaying the process by over three months, again.

“Throughout this process, you or your company will still be under U.S. economic sanctions. Dealing with American people or businesses can subject those business associates to stiff penalties for violating sanctions, acting as a massive deterrent that can make it extremely difficult for you or your company to function. Worse, evading sanctions in this way can make it more difficult for you to successfully petition to get them cleared, no matter how unfair they are.” – Dr. Nick Oberheiden, OFAC lawyer at Oberheiden P.C.

4. You Can Renew a Petition After a Denial

If OFAC denies your petition for clearance, you can renew it and get the agency to reconsider your claims. However, any second petition that you send should differ substantially from the first one, or else it is almost certain to get denied a second time. New factual circumstances should be included or, if there are no new developments that support your petition for clearance, new lines of argument should be presented to justify your removal from the SDN lists.

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