Companies Could See More OFAC Use of Private Blocking Orders, Law Firm Says
The Office of Foreign Assets Control may be preparing to increase its use of private blocking notices, which the agency sometimes sends to companies instead of publicly sanctioning a party on its Specially Designated Nationals List, Paul Weiss said in an October client alert.
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“While OFAC has taken such actions before,” a final rule published by the agency in September “provides greater regulatory clarity regarding such actions and may signal that OFAC intends to utilize them more regularly,” the law firm said.
The OFAC rule (see 2409130041) outlined the types of “non-public” actions the agency can take to block the property of a person or company or impose other measures that are “less than full blocking sanctions.” Although OFAC “generally exercises its blocking authority” by adding parties to the SDN List, the alert said, OFAC noted that it can also exercise that authority in “narrower ways,” including through private “directives” to financial institutions or other companies.
In those notices, OFAC may direct a bank, for example, to block the property of a customer and then notify that customer that their property is blocked, the alert said. The agency said it can also sanction that party, but it may determine instead that “U.S. national security or foreign policy interests are better served by prohibitions that may be narrower than blocking the entirety of the person’s property and interests in property.”
Paul Weiss said OFAC has “utilized certain non-public orders in the past,” but the new rule “reflects a regulatory articulation of those authorities and perhaps an effort to put them on a stronger legal footing.” Financial institutions and other companies “should consider making updates to their internal procedures and training by addressing the non-public ‘tailored actions’ described by OFAC.”