Deadline Approaching for Filing Newly Expanded OFAC Annual Report of Blocked Property

The September 30 deadline is fast approaching for submitting the Annual Report of Blocked Property (ARBP) to the U.S. Department of Treasury Office of Foreign Assets Control (OFAC). Under federal regulations, all "U.S. persons (or persons subject to U.S. jurisdiction) who have or have had in their possession or control any property blocked pursuant to this chapter, including financial institutions," are required to file an ARBP.¹

This is the second reporting cycle since OFAC issued new rules revising reporting requirements for parties holding blocked property, as well as for transactions rejected pursuant to OFAC regulations ("rejected transactions"). Although not a part of the ARBP reporting process, entities must remember to report rejected transactions to OFAC on an ongoing basis within 10 business days of the rejection of such transactions.²

Annual Report of Blocked Property

All holders of "blocked property"³ must file with OFAC, by September 30 of each year, a comprehensive report of all blocked property held as of June 30 of the reporting year.⁴ The 2020 version of the ARBP form, which can be accessed through the Treasury Department's website, requires information regarding, among other things, the ownership, geographic location, value, and asset classification of the blocked property.

Detailed guidance on the ARBP reporting requirements may also be found on the Treasury Department's website, but note that no ARBP need be filed:

• 1. If an entity is not holding blocked property;
• 2. Regarding property that has been unblocked by a general or specific license (even if the property has not yet been returned);⁵ or
• 3. Regarding property that was blocked pursuant to a now-terminated sanctions program.

An entity's failure to timely submit an ARBP form constitutes a violation of 31 C.F.R. Part 501, and may subject the entity to extensive criminal and civil penalties.

OFAC's 2019 Rule Changes

When filing the 2020 ARBP form, it is important to remember that OFAC last year revised the rules governing reporting requirements for holders of blocked property.⁶ For the purposes of 2020 ARBP submissions, it is critical to know that the 2019 changes require that entities that submit ARBPs:

• 1. "Include a disaggregated list showing each blocked asset contained within the omnibus account" if they maintain blocked funds in omnibus accounts; and
• 2. "Include the associated sanctions target (i.e., blocked person) for each blocked property record" included in the entity's ARBP.⁷

Reminder – Rejected Transaction Reports

In addition to the requirement to submit an ARBP, OFAC rules⁸ also require the ongoing submission of rejected transaction reports within 10 business days of a rejected transaction.⁹ Such reports may be filed using the model Report on Rejected Transaction provided by OFAC, but the use of such form is not required.

Remember that the same set of 2019 OFAC rules discussed above also altered the requirements for rejected transaction reports. As DWT has previously explained, the rules broadened the scope of who must file such reports to all U.S. persons or persons subject to U.S. jurisdiction, and not just financial institutions.

Additionally, OFAC expanded upon the types of transactions that must be included in such reports. The precise nature, and compliance implications, of OFAC's new requirements remain unclear, and are subject to an ongoing comment period and rulemaking at OFAC.

Please let us know if you have any questions regarding submission of, or need assistance in completing, the Annual Report of Blocked Property, or rejected transaction or unblocked property reports.

FOOTNOTES

1  31 C.F.R. § 501.603.
2  31 C.F.R. § 501.604.
3  Blocked property includes property subject to sanctions programs and the Specially Designated Nationals (SDN) list administered by OFAC, found in 31 C.F.R. Part 501. OFAC guidance explains that while title to blocked property remains with the targeted entity, the exercise of ownership rights over such property is prohibited without OFAC authorization.
4  31 C.F.R. § 501.603.
5  Note, however, that the unblocking of property may require reporting outside of the ARBP context "when specifically required by OFAC, such as when they are made a condition of a general or specific license, and shall be filed within 10 business days from the date property is unblocked." 31 C.F.R. § 501.603.
6  See 84 Fed. Reg. 29055 (Jun. 21, 2019).
7  See the OFAC guidance referenced above.
8  31 C.F.R. § 501.604.
9  OFAC, in a set of FAQs, distinguishes rejected transactions from blocked transactions as follows: "In some cases, an underlying transaction may be prohibited, but there is no blockable interest (i.e., that of a Specially Designated National (SDN) or blocked person or government) in the transaction. In these cases, the transaction is simply rejected, or not processed and returned to the originator."

This article was originally featured as a banking and financial services advisory on DWT.com on August 25, 2020. Our editors have chosen to feature this article here for its coinciding subject matter.