Understanding Blocked Assets and Their Consequences

Blocked assets can be a complex and frustrating issue, but understanding what they are and how they work is key to resolving the problem.

Blocked assets are frozen or restricted assets that are unable to be transferred or used due to various reasons, such as court orders, government sanctions, or financial institution policies.

This can happen to anyone, regardless of their financial situation or intentions.

Blocked assets can include bank accounts, stocks, and other types of investments, which can be a significant source of financial stress and uncertainty.

The consequences of blocked assets can be severe, including financial losses, emotional distress, and even reputational damage.

A different take: What Is Financial Asset Management

Blocked assets refer to any property or assets in which a sanctioned country, entity, or individual holds an interest.

These assets can include bank accounts or funds belonging to Specially Designated Nationals (SDNs) or those associated with a targeted government.

Blocked assets can also be items, supplies, and goods directly or indirectly exported from the United States to a prohibited foreign country or its nationals.

In fact, any assets or property in the United States or U.S.-controlled areas belonging to an SDN or associated with a designated foreign government or SDN are considered blocked.

Here are some examples of blocked assets:

Everyone who is required to block property, including financial institutions, must report it.

Consequences of non-compliance with OFAC sanctions can be severe, including fines and penalties for individuals and organizations.

To avoid these consequences, all persons, including financial institutions, in possession of property blocked under a sanctions program must report it.

The reporting requirement is mandatory and applies to all U.S. persons (or persons subject to U.S. jurisdiction) who possess or control property or interests in property blocked according to OFAC sanctions.

Some examples of blocked assets include bank accounts or funds belonging to Specially Designated Nationals (SDNs) or those associated with a targeted government.

Here are some examples of blocked assets:

If your money or property is blocked, it's placed in an interest-bearing account at the bank that performed the blocking.

The blocked money remains frozen until the sanctions against the blocked person are lifted. This can be a lengthy process, and it's essential to understand that the money will not be accessible to you until the sanctions are removed.

You can request that the funds be unblocked if the blocking was a mistake, such as having the same name as someone on the SDN List.

A specific license application must be filed, explaining the mistake and requesting the unblocking of the funds.

OFAC licenses permit individuals or entities to engage in transactions that would otherwise be restricted under U.S. sanctions regulations. There are two main categories of licenses: general and specific.

A general license allows a specific type of transaction for an entire group of people without requiring each individual to apply. It covers a broad spectrum of transactions and provides automatic authorization for those meeting the criteria.

In contrast, a specific license is issued to an individual or entity following a formal application process. This written approval permits a particular transaction that otherwise falls under sanctions restrictions, tailored to the applicant's request.

It is crucial for those conducting transactions under either a general or specific license to carefully follow all stipulations outlined in the license. Failing to adhere to these conditions may result in sanctions violations, exposing the individual or entity to legal consequences.

OFAC regulations often include detailed statements outlining the agency's licensing policies for certain types of transactions. These statements provide insight into transactions that align with U.S. foreign policy and national security goals.

Transactions that have already undergone significant review are more likely to receive licensing approval from OFAC.

Here's a summary of the two main categories of licenses:

If you're dealing with OFAC sanctions, it's essential to seek expert guidance to navigate the complexities of OFAC applications.

Our team of OFAC lawyers specializes in handling complex sanctions regulations and ensuring compliance with OFAC's requirements.

Whether you need help with obtaining specific or general licenses, applying for SDN delisting, or seeking the release of blocked funds, our lawyers can guide you through the process.

We can help increase the likelihood of a successful outcome by protecting your business interests and ensuring you're in compliance with OFAC's requirements.

Trust our expertise to help you navigate the intricacies of OFAC applications and reach out to us today for expert guidance on all OFAC-related matters.

If you discover blocked property, it's essential to freeze the assets immediately and prevent them from being transferred, withdrawn, or used in any way.

To report the blocked assets, you must submit a report to OFAC within 10 days using the required forms and provide all relevant details about the blocked property or transaction.

You'll also need to cease any further unlicensed dealings involving the blocked property, stopping all interactions or transactions until proper authorization is obtained.

To keep track of the blocked property, submit an annual report to OFAC by September 30th detailing any blocked property still under your control.

If the owner of the blocked property wants to release the assets, they can apply for a specific license from OFAC, but the blocked property remains frozen until a license is granted.

Here's a summary of the steps to take when reporting and releasing blocked assets:

Reports of Transferred Property are crucial in the reporting and release process. They provide a record of property that has been transferred from one person to another, such as a sale or gift.

A Report of Transferred Property must be filed within 30 days of the transfer date. This is a statutory requirement to ensure compliance with tax laws.

The report must include the name and address of the transferor and transferee, as well as a description of the property and its value. This information is used to update tax records and assess any tax liability.

On a similar theme: Asset Tax

A transfer of property can trigger a tax liability for the transferee, even if they didn't receive any consideration for the transfer. For example, if a parent gifts a property to their child, the child may still be liable for taxes on the property's value.

The transferee must file a tax return and report the transfer on their tax return. They may also need to pay taxes on the property's value, depending on the circumstances of the transfer.

For your interest: Asset Return Ratio

If you need to release blocked funds, it's essential to submit a detailed application to OFAC.

To boost your chances of approval, provide all required details and supporting documentation, referencing relevant OFAC regulations and licensing policies.

You can submit the application electronically via OFAC's website or by mail using the appropriate form.

Including additional reasoning for why the funds should be released can strengthen your application.

OFAC reviews the application, with processing times ranging from a few weeks to several months.

Here's a step-by-step guide to submitting an application for the release of blocked funds:

Applicants will be notified of the decision once the review is complete.

If you're unsure about specific requirements, you can find additional guidance on OFAC's website under the "Guidance on Licensing Policy" section.

Identifying and managing blocked assets can be a complex task, but it's essential to understand the basics.

Blocked assets refer to any property or assets in which a sanctioned country, entity, or individual holds an interest. This can include assets or funds owned or controlled by sanctioned individuals or entities, as well as assets or funds where sanctioned parties have a 50% or greater ownership stake.

To identify blocked assets, you need to regularly screen customers and transactions against the OFAC Specially Designated Nationals (SDN) list. This list includes individuals, companies, and entities that are subject to sanctions, as well as their owned or controlled assets.

You should also evaluate the ownership structure of businesses and entities you engage with, as if a blocked person or entity holds 50% or more ownership in a company, their property and assets are considered blocked under OFAC regulations.

Watch for red flags, such as payments or transfers that involve sanctioned individuals or entities, or transactions linked to high-risk regions with active sanctions. Be especially vigilant with transactions originating from or destined for sanctioned countries.

Here are some key steps for identifying blocked property and assets:

Failing to verify OFAC's SDN list can result in blocked or suspended accounts, the imposition of reporting requirements, and civil and criminal penalties.

Financial institutions, such as banks and mortgage lenders, must conduct due diligence to ensure that credit recipients are not subject to OFAC sanctions.

This means verifying the SDN list before extending credit or conducting financial transactions, or facing serious consequences.

Blocked or suspended accounts can cause significant financial loss and inconvenience to individuals and businesses.

Civil and criminal penalties for non-compliance can be severe, including multimillion-dollar fines and up to 20 years in prison.

Related reading: What Accounts Are Current Assets

Banks, mortgage lenders, and other credit-issuing entities must conduct due diligence to ensure credit recipients aren't subject to OFAC sanctions.

This due diligence involves verifying the OFAC SDN list to avoid blocked or suspended accounts, and to prevent the imposition of reporting requirements.

Failing to verify the SDN list can result in severe penalties, including multimillion-dollar fines and up to 20 years in prison.

Broaden your view: Credit Asset Account

If an OFAC investigation is referred for criminal prosecution, a person with a visa or permanent residency could be subject to deportation or removal proceedings if a conviction is made.

The threat to immigration status is usually not present in the context of a civil investigation.

People on the SDN list are restricted from traveling to the United States and getting visas, which can make it difficult for foreign individuals to visit the country.

A person on the SDN list may also lose the privilege of obtaining a visa to visit the United States.

In general, being subject to OFAC sanctions does not directly affect a person's immigration status, unless it leads to a criminal conviction.

Here are some possible immigration consequences of OFAC sanctions:

Before engaging in any trade or commerce with countries or individuals subject to sanctions, businesses and organizations must first confirm if their proposed transaction is restricted.

The OFAC-administered sanctions programs target a total of 32 countries, including Angola, The Balkans, and Russia.

Businesses must identify any potential prohibitions and assess whether obtaining a specific license is necessary.

Sanctions also target individuals and entities identified as Specially Designated Nationals due to their suspected involvement in or support of terrorism.

The countries subject to sanctions include Cuba, Iran, and Syria, among others.