Recently posted in the National Law Review an article by Simi Z. Botic and D. Michael Crites of Dinsmore & Shohl LLP regarding the climate surrounding our nation’s safety has drastically changed since 9/11:
Since September 11, 2001, the climate surrounding our nation’s safety has drastically changed. In an effort to promote United States foreign policy and national security goals, the Office of Foreign Assets Control (“OFAC”) has responded to the changing political environment. Although OFAC is not a recent development, the agency certainly operates with the present security sensitivities in mind.
OFAC operates within the U.S. Department of the Treasury, administering and enforcing economic and trade sanctions. Blocking necessary assets exemplifies one trade sanction often imposed by OFAC. In particular, sanctions are enforced against targeted foreign countries, terrorist regimes, drug traffickers, distributers of weapons of mass destruction, and other individuals, organizations, government entities, and companies that threaten the security or economy of the United States.
By enforcing the necessary economic and trade sanctions, OFAC restricts prohibited transactions. OFAC defines a prohibited transaction as a “trade or financial transaction and other dealing in which U.S. persons may not engage unless authorized by OFAC or expressly exempted by statute.” OFAC is largely responsible for investigating the “prohibited transactions” of individuals, organizations, and companies who operate in foreign nations. OFAC also has the ability to grant exemptions for prohibited transactions on a case-by-case basis.
Administrative subpoenas, vital OFAC investigation tools, allow OFAC to order individuals or entities to keep full and complete records regarding any transaction engaged in, and to furnish these records at any time requested. Both the Trading with the Enemy Act of 1917, 5 U.S.C. § 5, and the International Emergency Economic Powers Act, 50 U.S.C. § 1702(a)(2), grant OFAC the authority to issue administrative subpoenas.
Adam J. Szubin is the current director of OFAC. In his capacity as director, Mr. Szubin is authorized by 31 CFR § 501.602 to hold hearings, administer oaths, examine witnesses, take depositions, require testimony, and demand the production of any books, documents, or relevant papers relating to the matter of investigation. Once OFAC has issued an administrative subpoena, the addressee is required to respond in writing within thirty calendar days from the date of issuance. The response should be directed to the named Enforcement Investigations Officer, located at the U.S. Department of the Treasury, Office of Foreign Assets Control, Office of Enforcement, 1500 Pennsylvania Ave., N.W., Washington, D.C.
Should an addressee fail to respond to an administrative subpoena, civil penalties may be imposed. If information is falsified or withheld, the addressees could receive criminal fines and imprisonment. OFAC is authorized to penalize a party up to $50,000 for failure to maintain records. Therefore, should you find yourself the recipient of an OFAC administrative subpoena, it is imperative that you do not delay in responding. Typically, OFAC requests detailed information about payments or transactions, along with documentation to support such information. The subpoena response should be drafted by your attorney. The addressee of the letter should not have direct communication with OFAC. Counsel for the addressee should also follow up with the individual OFAC officer to make sure that all necessary paperwork was received.
Lastly, entities are encouraged to make voluntary disclosures when there has been an OFAC violation. Once a subpoena has been issued, disclosures are no longer considered voluntary. If information is turned over in response to an administrative subpoena, it may then be referred to other law enforcement agencies for possible criminal investigation and prosecution. Therefore, if there is a possible violation of OFAC, it is in your best interest to consult with counsel about the proper steps to take moving forward.