OFAC Modifies Sanctions Reporting Requirements: OFAC Has Amended its Reporting, Procedures and Penalties Regulations (31 C.F.R. part 501) to Extend Rejected Transaction Reporting Requirements to Non-Financial Institutions and Incorporate New Reporting Requirements

Sullivan & Cromwell LLP - June 26, 2019

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) published an interim final rule, effective as of June 21, 2019, amending its Reporting, Procedures and Penalties Regulations (the “Reporting Regulations”).  Most significantly, the amendments extend to non-financial institutions that are U.S. persons a requirement to submit reports to OFAC after rejecting transactions that would be prohibited by OFAC-administered sanctions. Prior to the June 21 amendments, although financial institutions and non-financial institutions were both required to file blocked property reports, only financial institutions were required to submit reports on rejected funds transfers. These amendments also expand the scope of rejection reports beyond funds transfers to include, in addition to wire transfers, transactions related to trade finance, securities, checks, foreign exchange, and goods or services. As amended, the Reporting Regulations also require additional information to be provided to OFAC in blocking reports, and add reporting requirements when property is unblocked pursuant to certain OFAC licenses. While the amendments have the full force of law as of June 21, OFAC is soliciting public comment on various aspects of the interim final rule. Comments are due on July 22, 2019. Consistent with OFAC’s recent compliance guidance, U.S. persons and persons subject to U.S. jurisdiction, including but not limited to financial institutions, should review their sanctions compliance-related internal controls in light of the June 21 amendments to ensure that such controls are appropriately scoped to meet the new and amended requirements under the Reporting Regulations.