The annual September 30 deadline for submitting the Annual Report of Blocked Property (ARBP) to the U.S. Department of Treasury Office of Foreign Assets Control (OFAC) is approaching once again. Under federal regulations, all "U.S. persons (or persons subject to U.S. jurisdiction) who have or have had in their possession or control any property blocked pursuant to this chapter, including financial institutions," are required to file an ARBP.1
In addition to submitting the ARBP, institutions should remember their continued obligation to report blocked property as well as transactions rejected pursuant to OFAC regulations ("rejected transactions") within 10 business days from the date that property becomes blocked or the transaction was rejected. Rejected transactions are not reported annually like blocked property.2
Annual Report of Blocked Property
All holders of "blocked property"3 must file with OFAC by September 30 of each year a comprehensive report of all blocked property held as of June 30 of the reporting year.4 The 2021 version of the ARBP form, which can be accessed through the Treasury Department's website, requires information regarding, among other things, the ownership, geographic location, value, and asset classification of the blocked property.
Institutions may also review additional guidance and instructions published by OFAC for the 2021 ARBP reporting requirements on the Treasury Department's website. Note that no ARBP need be filed:
- 1. If an entity is not holding blocked property;
- 2. Regarding property that has been unblocked by a general or specific license (even if the property has not yet been returned);5 or
- 3. Regarding property that was blocked pursuant to a now-terminated sanctions program.
For the purposes of 2021 ARBP submissions, it is critical to know that recent rule changes6 require that entities submitting ARBPs:
- 1. "[P]rovide a disaggregated list showing each blocked asset record contained within [omnibus] accounts" if they maintain blocked funds in such accounts; and
- 2. "[R]eport the associated sanctions target(s) whose property is blocked, such as a Specially Designated National or other blocked person." Where the sanctions target is not evident, entities must "include a narrative description of the interest(s) of the target(s) in the transaction."7
An entity's failure to timely submit an ARBP constitutes a violation of 31 C.F.R. Part 501 and may subject the entity to extensive criminal and civil penalties.
Reminder: Rejected Transaction Reports
In addition to the requirement to submit an ARBP, OFAC rules8 also require the ongoing submission of rejected transaction reports within 10 business days of a rejected transaction.9 Such reports may be filed using the model Report on Rejected Transaction provided by OFAC, but the use of that form is not required.
Recent rule changes altered the requirements for rejected transaction reports.10 As DWT has previously explained, the rules broadened the scope of who must file such reports to include all U.S. persons or persons subject to U.S. jurisdiction and not just financial institutions. Additionally, OFAC expanded upon the types of rejected transactions that must be included in such reports.
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Please let us know if you have any questions or need assistance in completing or submitting the Annual Report of Blocked Property, or the rejected transaction or unblocked property reports.
1 31 C.F.R. § 501.603.
2 31 C.F.R. § 501.604.
3 Blocked property includes property subject to sanctions programs and the Specially Designated Nationals (SDN) list administered by OFAC, found in 31 C.F.R. Part 501. Shippers and financial institutions must review the SDN list to prevent the flow of funds or goods to or from the targeted nation or individual. When the property is blocked, the assets become frozen and are held by the shipper or financial institution. OFAC guidance explains that while title to blocked property remains with the targeted entity, the exercise of ownership rights over such property is prohibited without OFAC authorization.
4 31 C.F.R. § 501.603.
5 Note, however, that the unblocking of property may require the submission of additional reports outside of the ARBP context "when specifically required by OFAC, such as when [such reports] are made a condition of a general or specific license, and shall be filed within 10 business days from the date property is unblocked." Id.
6 See 84 Fed. Reg. 29055 (Jun. 21, 2019).
7 See the OFAC guidance referenced above.
8 31 C.F.R. § 501.604.
9 OFAC, in a set of FAQs, distinguishes rejected transactions from blocked transactions as follows: "In some cases, an underlying transaction may be prohibited, but there is no blockable interest (i.e., that of a Specially Designated National (SDN) or blocked person or government) in the transaction. In these cases, the transaction is simply rejected, or not processed and returned to the originator."
10 See 84 Fed. Reg. 29055 (Jun. 21, 2019).