Sanctions are a powerful tool in international relations, used to influence behavior and enforce policies without resorting to military action. However, the dynamics of politics and global economics are ever-changing, and there may come a time when individuals or entities need to be removed, or “delisted,” from sanction lists. Additionally, engaging in certain transactions might require a special license from OFAC. This article aims to demystify these processes and provide insights through recent case studies.

Understanding the Delisting Process

The delisting process is a mechanism that allows individuals or entities to be removed from sanctions lists. The United Nations Security Council, for example, has established a Focal Point for Delisting to handle such requests. The process involves submitting a detailed request that counters the reasons for the initial listing and demonstrates why the designation no longer applies or was incorrect. If the request is made by the state that initially proposed the listing, the name will be removed after a fixed period unless opposed by the committee or referred to the Security Council.

Applying for a Special License from OFAC

OFAC administers and enforces economic and trade sanctions based on US foreign policy. A specific license from OFAC is an authorization to engage in a transaction that would otherwise be prohibited. The application process involves providing detailed information about the transaction and the parties involved. It’s crucial to include accurate and verifiable information to increase the likelihood of approval.

Recent Case Studies

1. Delisting of En+, Rusal, and EuroSibEnergo: In a notable case from January 27, 2019, OFAC lifted sanctions on En+ Group plc, UC Rusal plc, and JSC EuroSibEnergo after they reduced Oleg Deripaska’s shareholding stake and severed his control. This case highlights the importance of corporate restructuring and governance changes in the delisting process.

2. Filing a Petition for Removal from OFAC List: OFAC’s integrity relies on its ability to remove persons from sanctions lists when justified. The process involves submitting a petition with detailed reasons for removal, and each case is reviewed individually.

Technicalities and Considerations

Lawyers advising clients on these matters must be aware of the technicalities involved, such as the specific information required in delisting requests and OFAC license applications. It’s also essential to keep abreast of changes in sanctions regulations and understand the nuances of each case.

Expediting OFAC License Applications

Obtaining an Office of Foreign Assets Control (OFAC) license can be a critical step for clients navigating international sanctions. Here are some strategies to expedite the process:

1. Complete and Detailed Applications: When applying for an OFAC license, ensure that the application is thorough and includes all necessary information. Describe the proposed transaction in detail, including the names and addresses of individuals or companies involved. Attach any relevant supporting documentation. A well-prepared application increases the chances of swift approval.

2. Understand the Specifics: Different sanctions programs have varying requirements. Familiarize yourself with the specific regulations applicable to your client’s situation. Some programs provide exemptions for certain transactions (e.g., donations for humanitarian purposes), while others require a detailed license application.

3. Interagency Consultation: OFAC reviews each application on a case-by-case basis and may consult with other agencies. While the review duration is unpredictable, adhering to existing guidelines will help expedite the determination.

4. Emergency Situations: Expedited processing may be available for emergencies or natural disasters. If your client faces urgent circumstances, contact OFAC to explore expedited options.

5. Connections: While not a formal strategy, it’s worth noting that personal connections can sometimes expedite the process. However, relying solely on this approach is not recommended, as OFAC follows established procedures.

Remember that both general licenses (self-selecting and self-executing) and specific licenses (issued in response to written applications) play a crucial role. Lawyers must ensure strict compliance with license conditions to avoid violations. By mastering these nuances, legal professionals can effectively guide their clients through the complexities of OFAC licensing.

Example of a Successful Expedited OFAC License Application

Background: A U.S.-based medical supplies company seeks to export humanitarian aid to a country under U.S. sanctions due to a sudden outbreak of a life-threatening disease. The situation is urgent, and the supplies need to be delivered promptly to save lives.

Steps Taken:

1. Immediate Consultation with OFAC: The company’s legal team contacts OFAC directly to discuss the urgency and the humanitarian nature of the transaction.

2. Preparation of a Detailed Application: The application includes comprehensive details about the medical supplies, the logistics of the transport, the entities involved in the transaction, and the end-users of the supplies. The legal team ensures that all information is accurate and verifiable.

3. Supporting Documentation: The application is accompanied by letters from health authorities in the destination country, outlining the emergency and the need for the supplies. Additionally, the company includes its compliance program and past licensing history to demonstrate its reliability.

4. Expedited Review Request: The legal team formally requests expedited processing, citing the humanitarian emergency and the potential for loss of life without the supplies.

5. Follow-Up: The team maintains open communication with OFAC, providing any additional information requested promptly.

Outcome: OFAC prioritizes the review of the application due to the emergency nature and the well-prepared documentation. The license is granted within a short timeframe, allowing the medical supplies to be exported and delivered to the affected population.

Here are some common reasons for OFAC license denials:

1. Insufficient Information: One of the primary reasons for denial is an incomplete or poorly documented license application. If the application lacks essential details about the proposed transaction, parties involved, or supporting documentation, OFAC may deny it.

2. Failure to Meet License Conditions: Even if a license is granted, strict compliance with its conditions is crucial. Any deviation from the authorized scope or failure to adhere to reporting requirements can lead to denial or revocation of the license.

3. General License Availability: OFAC generally does not grant specific licenses when a general license already exists for the same type of transaction. If a general license covers the proposed activity, applicants should use it rather than applying for a specific license.

4. Contradictory National Security Interests: If the proposed transaction conflicts with broader national security objectives, OFAC may deny the license. Balancing individual interests with broader policy goals is a delicate process.

5. Lack of Justification: Applicants must demonstrate a compelling reason for the requested license. If the justification is weak or insufficient, OFAC may deny the application.

6. Changed Circumstances: Sometimes, applicants fail to provide updated information or address changes in circumstances. OFAC expects applicants to keep their submissions accurate and current.

7. Inadequate Risk Mitigation Measures: If the proposed transaction poses significant risks related to sanctions evasion, money laundering, or other illicit activities, OFAC may deny the license.

Remember that a denial by OFAC constitutes final agency action, and while there is no formal appeal process, OFAC may reconsider determinations for good cause if new relevant information emerges. Legal professionals advising clients on license applications should be aware of these factors to improve their chances of success.