U.S. Office of Foreign Assets Control Issues Interim Somalia Sanctions Regulations
The United States Department of the Treasury's Office of Foreign Assets Control (OFAC) has issued interim Somalia Sanctions Regulations (hereinafter "the Regulations"), effective as of May 5, 2010, implementing the Executive Order Blocking Property of Certain Persons Contributing to the Conflict in Somalia (hereinafter "the Executive Order"), issued by President Barack Obama on April 12, 2010.
The Regulations prohibit all transactions set forth in President Obama's Executive Order. Specifically, these Regulations prohibit the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any person whose property interests have been blocked pursuant to the Executive Order (i.e – those individuals or entities who have engaged in acts that directly or indirectly threaten the peace, security or stability of Somalia). The Regulations also prohibit the receipt of any contribution or provision of funds, goods or services from any such individual or entity.
The new OFAC Regulations note that the names of persons expressly identified in the President's Executive Order have been published on OFAC's "Specially Designated Nationals and Blocked Persons List" ("SDN" list). In addition, the Regulations apply to all property and interests in property of an entity which is at least 50% owned, directly or indirectly, by a person who appears on the SDN list, even if that specific entity is not itself listed on the SDN list.
The Regulations provide that any transfers of property or property interests made in violation of the Regulations and/or the Executive Order are null and void. An appropriate license or other authorization issued by OFAC before, during or after a transfer shall validate the transfer and make it enforceable. The transferred property will only be released if the person with whom such property is or was held or maintained can establish to OFAC:
- that the transfer was not in willful violation of the OFAC Regulations or the President's Executive Order;
- that the person whose property is or was held or maintained did not have reasonable cause to know or suspect that such transfer required a license or authorization by OFAC (or, if a license purportedly did cover the transfer, that the license or authorization had been obtained by fraud or other misrepresentation of a third party); and
- the person with whom such property is or was held or maintained filed a report with OFAC setting forth the circumstances of the transfer promptly upon discovery that the transfer was in violation of the Regulations and/or Executive Order; that it was an unlicensed or unauthorized transfers; or that a license purporting to cover the transfer had been obtained by fraud or other misrepresentation of a third party.
The Regulations also expressly provide that any payment of funds or transfer of credit involving a person identified on the SDN list (or otherwise subject to these Regulations) which comes within the possession or control of a U.S. financial institution must be blocked in an interest-bearing account of that financial institution. The procedures for unblocking funds or for seeking the removal of a person's or vessel's name from the SDN list are governed by 31 CFR 501.806 and 501.807, which require the applicant to submit a written request to OFAC.
OFAC has stated that it intends to supplement the interim Regulations, (which have been published in abbreviated form to provide immediate guidance to the public), with a more comprehensive set of regulations, which may include additional interpretive and definitional guidance and additional general licenses and statements of licensing policy.
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