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OFAC Updates Guidance on Entities Owned by Persons Whose Property is Blocked

Thursday, August 14, 2014
Sandler, Travis & Rosenberg Trade Report

The Treasury Department’s Office of Foreign Assets Control has updated its 2008 guidance on entities owned by persons whose property and interests in property are blocked to establish new guidance (set forth below) with respect to entities owned 50 percent or more in the aggregate by more than one blocked person. OFAC states that it will incorporate this guidance as regulations implementing new sanctions programs are issued and that it expects to amend regulations implementing existing sanctions programs to reflect this guidance.

Property blocked pursuant to an executive order or regulations administered by OFAC is broadly defined to include any property or interest in property, tangible or intangible, including present, future or contingent interests. A property interest subject to blocking includes interests of any nature whatsoever, direct or indirect.

Blocked persons are considered to have an interest in all property and interests in property of an entity in which such blocked persons own, whether individually or in the aggregate, directly or indirectly, a 50 percent or greater interest. Consequently, any entity owned in the aggregate, directly or indirectly, 50 percent or more by one or more blocked persons is itself considered to be a blocked person. The property and interests in property of such an entity are blocked, regardless of whether the entity itself is listed in the annex to an executive order or otherwise placed on OFAC’s list of specially designated nationals. Accordingly, a U.S. person generally may not engage in any transactions with such an entity unless authorized by OFAC. In certain OFAC sanctions programs (e.g., Cuba and Sudan) there is a broader category of entities whose property and interests in property are blocked based on, for example, ownership or control.

U.S. persons are advised to act with caution when considering a transaction with a non-blocked entity in which one or more blocked persons have a significant ownership interest that is less than 50 percent or which one or more blocked persons may control by means other than a majority ownership interest. Such entities may be the subject of future designation or enforcement action by OFAC. Furthermore, a U.S. person may not procure goods, services or technology from, or engage in transactions with, a blocked person directly or indirectly, including through a third-party intermediary.

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