OFAC SDNT/SDNTK Removals: OFAC Compliance for Foreign Counsel?
May 25, 2012 Leave a comment
Yesterday, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) removed a number of individuals and entities from the OFAC List of Specially Designated Nationals and Blocked Persons, commonly referred to as the OFAC SDN List, who had be designated as Specially Designated Narcotics Traffickers and Specially Designated Narcotics Trafficking Kingpins. Among these individuals was one of my clients, to remain unnamed, whose designation provides an important lesson on OFAC SDN designations and reconsiderations for lawyers in foreign countries. A brief overview of this individual’s case will help you understand what I mean.
My client was an attorney assisting in the formation of corporate entities in the country which he practiced law. In that country, attorneys forming corporations for their clients and performing other duties on behalf of that corporation are required to have a power of attorney over that corporation on record with the authorities of that country. My client was only involved in the initial formation of a number of entities that were later linked to money laundering operations on behalf of drug traffickers. My client’s services to these entities ended shortly after their initial formation and there was no further contact with them for many years prior to their designation. However, since my client was still on record as having a power of attorney for them, OFAC thought that my client was providing material assistance to these entities and therefore also designated my client. As a result, my client spent nearly four and a half years on the OFAC SDN List and nearly two years pursuing a reconsideration. In the end, through rescission of the powers of attorney for these companies and the provision of numerous documents, my client was removed.
I think there is an important lesson here for lawyers in foreign countries. Often times, counsel publicly sign their names, file documents, and makes other representations on behalf of their clients. However, how much do you really know about your clients? Sure, the big firms in the U.S. are pretty thorough in vetting clients before they take them on, but what about solo practitioners and firms in other countries? Should they also be worried about OFAC compliance?
Well given the case of my client, surely they should. Foreign counsel in countries with a high number of nationals designated pursuant to OFAC administered sanctions programs should carefully screen potential clients and current clients to ensure they aren’t engaged in business with someone who is involved in sanctionable activity. My reason for saying this is because it is clear that OFAC will consider the that a certain level of provision of legal services to an such parties as a basis for designation. Therefore, foreign counsel would be wise to avoid the severe consequences of an OFAC designation and screen their clients carefully.
The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or firstname.lastname@example.org.