On November 9, 2009, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) issued "Economic Sanctions Enforcement Guidelines" as final rule in the Federal Register, setting forth the enforcement guidelines that OFAC will follow in determining a response to violations of the OFAC-enforced U.S. economic sanctions programs.
This rule has been initially published as an interim final rule with request for comments on September 8, 2008. In response to comments received, OFAC made several changes to the final version of the rule:
· The definition of "voluntary self-disclosure" was amended to clarify that when a third party required to report an apparent violation fails to do so, but a person that has committed an apparent violation and is subject to any of the OFAC sanctions ("Subject Person") reports the violation to OFAC, the notification will still be considered a voluntary self-disclosure. However, in those cases where the third party does notify OFAC before a final enforcement response to the violation, a Subject Person's notification will not be considered a voluntary self-disclosure even if it precedes the third party's notification.
· The definition of "voluntary self-disclosure" was also amended to clarify that a self-initiated notification to OFAC made at the same time as another government agency learns of the apparent violation (either through disclosure or otherwise) does qualify as voluntary self-disclosure if the other aspects of the definitions are met. This change is intended to cover self-disclosures made to OFAC and another government agency simultaneously.
· Similarly, if a Subject Person notifies another government agency of an apparent violation as required by that agency, the notification may be considered a voluntary self-disclosure by OFAC, based on a case-by-case determination.
· On the requested clarification on Suspicious Activity Report (SAR) filing, OFAC responded that the filing of a SAR does not itself preclude a determination of voluntary self-disclosure for a subsequent self-disclosure to OFAC of the same transaction, unless OFAC learns of the apparent violation prior to the self-disclosure filing.
· Regarding party cooperation and tolling agreements, the final rule eliminates any reference to statute of limitations waivers. Furthermore, with respect to whether a Subject Person's refusal to enter into a tolling agreement should be considered an aggravating factor in assessing the person's cooperation, the final rules states that a Subject Person's unwillingness to enter into a tolling agreement will not be considered against the Subject Person. On the other hand, if a Subject Person is willing to enter into a tolling agreement, it may be considered a mitigating factor.
· For the purposes of calculating a penalty in cases involving a set of "substantially similar violations," OFAC clarified that the penalty reduction of up to 25% for a Subject Person's first violation will generally apply to the entire set of "substantially similar violations" and not solely to the first of those violations.
· OFAC also amended the final rule to make clear that determination of appropriate enforcement response is not limited to prior formal determinations of sanctions violations. Thus, prior cautionary letters, warning letters, and evaluative letters will be considered in determining OFAC sanctions, if any. This particular amendment specifies that consideration of a Subject Person's sanction history will be limited to the five years preceding the transaction giving rise to the apparent violation.
· On the issue of attorney-client privilege or the attorney work product doctrine, the final rule was amended by eliminating the reference to "failure to furnish the requested information" and instead referring to a "failure to comply" with a request for information. The language is intended to specify that OFAC will not seek penalties in cases where responsive information is withheld on the basis of apparently applicable and properly invoked privilege.
· The Enforcement Guidelines also clarify the base penalty amounts for transactions within the scope of the Trading With the Enemy Act (TWEA), which are capped at the $65,000. In non-egregious cases involving apparent violations of TWEA, when the apparent violation is disclosed through a voluntary self-disclosure, the civil penalty is capped at the $32,500. Non-egregious violations of TWEA not voluntarily disclosed are capped at the $65,000.
· The penalty for failure to maintain records in conformance with the requirements of OFAC regulations is set at a maximum of $50,000.
More detailed discussion of the amendments and public comments can be found in the final rule, published as Appendix A to Part 501 - Economic Sanctions Enforcement.