OFAC sanctions removal: asset unblocking procedure

Attorney, Family Office

Current situation overview

The U.S. Office of Foreign Assets Control (OFAC) is the agency responsible for implementing U.S. economic and trade sanctions.

OFAC has the following powers

freezing bank accounts and financial assets
prohibition on conducting transactions with the object and/or person
termination of SWIFT system access for banks
prohibition on investments in sanctioned companies and/or sectors
restriction on use of U.S. currency and financial system

The legal basis for challenging OFAC asset blocking is the Administrative Procedure Act, which allows challenging federal agency decisions if they are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law."

Based on more than 20 cases at our firm and available information on colleagues' cases, successful challenges can be built on the following arguments:

grounds for blocking have ceased (resignation from position, company liquidation)
court-ordered settlement (resignation from position, termination of contacts)
OFAC error (mistaken identity)

Challenging OFAC's authority and insufficient evidence have not led to success.

Administrative appeal procedure

The first step is filing an application for a specific or general OFAC license:

Specific license: individual authorization for a particular transaction or activity
General license: authorization for a certain type of transaction for all persons meeting established criteria

Judicial appeal

In case of OFAC denial, the next step is going to court:

filing a lawsuit in U.S. federal court
challenging OFAC actions based on the Administrative Procedure Act
proving the illegality, arbitrariness, or unreasonableness of OFAC's decision

Most settlements on sanctions matters are concluded through judicial proceedings. These settlements typically include:

Elimination of the root cause of sanctions imposition (e.g., ceasing certain activities)
Adoption of negative covenants, such as commitments not to hold certain positions or contact sanctioned persons
Consent to periodic monitoring by OFAC

Role of law firms

Law firms are permitted to represent sanctioned persons' interests in ensuring access to defense of their rights. This exception is provided in most sanctions programs and confirmed by General License No. 14 under many sanctions regimes.

Law firms may

Advise on sanctions applicability
File license applications
Represent clients' interests in court
Interact with OFAC on behalf of the client

Information requests

There is an option to send clarification requests to OFAC, but this procedure has significant limitations:

Request review time is also approximately 18 months
OFAC response content typically does not go beyond publicly available information in press releases
In most cases, sending requests is impractical due to lengthy waiting times and predictable responses