Letter to OFAC on the Amendment of the Reporting, Procedures and Penalties Regulations

Dear Director Smith:

The American Bankers Association (ABA)  appreciates the opportunity to comment on the interim final rule (IFR) amending the Reporting, Procedures and Penalties Regulations (Regulations) published by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). Effective on August 8, the IFR will generally mandate electronic filing of certain submissions to OFAC. Among other changes, it also establishes a new process for banks to apply to OFAC for the release of mistakenly blocked funds,  and it modifies existing reporting requirements.

Under OFAC's rules, banks are required to avoid engaging in prohibited transactions,  and must report to OFAC shortly after they block or reject a prohibited transaction. Initial blocking reports must be filed "within 10 business days from the date the property becomes blocked." Violations of OFAC’s sanctions regulations, including as well as failure to timely file required reports  are strict liability offenses, and OFAC strongly encourages banks establish risk-based sanctions compliance programs to prevent violations. In order to comply with OFAC's regulations, once a bank gets notice of a possible "hit" during sanctions screening, the bank must rapidly determine whether a transaction appears to be prohibited, and, absent authorization from OFAC, must quickly make the decision to block a transaction —if a designated person or entity appears to have an interest in the transaction—or reject a prohibited transaction that is not subject to blocking. Once those preliminary determinations are made, banks must immediately begin taking internal steps to meet OFAC’s reporting deadlines.

I. Summary of the Comment

ABA appreciates OFAC's revision of the Regulations to address topics of interest and concern to banks, including by establishing a new streamlined compliance release process banks may use to speed the release of funds, and prevent additional financial consequences to innocent customers. Banks will be able to apply directly to OFAC for the release of funds and property a bank later determines to have been blocked by mistake. To ensure that this new procedure achieves the intended efficiencies and provides necessary sanctions relief to innocent bank customers, we urge OFAC to establish a deadline by which OFAC will respond to compliance release requests, such as 30 days from the electronic request. We further encourage OFAC to publish FAQs related to the new compliance release procedure to clarify the nature of the mistakes eligible for streamlined relief.

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