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Blacklisted?  Delisting Potential for Mistaken Identity or Changed Circumstances

Blacklisted? Delisting Potential for Mistaken Identity or Changed Circumstances

From last week’s post (https://thesanctionsgeek.com/oh-the-myriad-ways-ofac-can-blacklist-you/), if you happen to find yourself or a business partner triggering a blacklist screen alert, there might be different reasons for the trigger that merit inquiry. It could be due to mistaken identity or changed circumstances, and there is potential to request delisting.

I. Mistaken Identity Delisting

In my last Fortune 200 company job, I travelled to Mexico City with one of our internal auditors (who was fully bilingual in both Spanish and English). The problem was that his named triggered a “specially designated national” (SDN) match which also translated into a “Do Not Fly” prohibition. Fortunately, this was not the first time my former work colleague had encountered this issue, and he produced an electronic file with key documentation indicating his full name, place and date of birth as well as his current residence address. All of these were distinguishing facts that helped clear his name. We boarded our flight without further ado.

There is an Office of Foreign Asset Control (OFAC) procedure under 31 CFR § 501.806 to petition to unblock funds that have been frozen due to mistaken identity. Under subsection (d), a request to release funds should include the following information, where known, concerning the transaction:

(1) The name of the financial institution in which the funds are blocked;

(2) The amount blocked;

(3) The date of the blocking;

(4) The identity of the original remitter of the funds and any intermediary financial institutions;

(5) The intended beneficiary of the blocked transfer;

(6) A description of the underlying transaction including copies of related documents (e.g., invoices, bills of lading, promissory notes, etc.);

(7) The nature of the applicant’s interest in the funds; and

(8) A statement of the reasons why the applicant believes the funds were blocked due to mistaken identity.

This can happen more often than not if the financial institution uses screening software with fuzzy logic that picks up potential aliases. Indeed, many banks have received harsh OFAC penalties and tend to err on the side of caution. A well documented request can ensure release of overzealous fund blocking in relatively short order.

II. Changed Circumstances Delisting

It is also possible that one is being blocked as a result of a true SDN match. There is also a procedure to request reconsideration based on changed circumstances. 31 CFR § 501.807 governs Requests for delisting from the SDN and Blocked Persons List.

This regulation provides a procedure for submitting arguments or evidence that might establish that insufficient basis exists for the SDN designation. The blocked person also may propose remedial steps, such as corporate reorganization, resignation of persons from positions in a blocked entity, or similar steps, which the person believes would negate the basis for designation.

As another example, the regulation explains a person owning a majority interest in a blocked vessel may propose the sale of the vessel, with the proceeds to be placed into a blocked interest-bearing account after deducting the costs incurred while the vessel was blocked and the costs of the sale. Taking such action could provide grounds for delisting as an SDN.

III. It is Advisable to Request a Meeting with OFAC on Delisting

§ 501.807(c) permits a blocked person to request a meeting with the OFAC decision makers; however, the regulation states such meetings are not required and that OFAC may, at its discretion, decline to conduct such a meeting.

With experienced counsel, it is highly advisable to request such a meeting. The value of establishing credibility in-person cannot be understated with so much at stake in such proceedings. When making the initial request, it will be necessary to inquire about the in-person meeting opportunity at the same time. To have the best hope of having a meeting request granted, one should present a proposed agenda along with a list of supporting documents, visual aids and third party certifications and verifications.