95. Does a financial institution have the obligation to screen account beneficiaries for compliance with OFAC regulations?
"Property," as defined in OFAC regulations, includes most products that financial institutions offer to their clients. "Property interest," as defined by OFAC, includes any interest whatsoever, direct or indirect, present, future or contingent. Given these definitions and as a matter of sound banking practice, it is prudent for financial institutions to screen account beneficiaries upon account opening, while updating account information, when performing periodic screening and, most definitely, upon disbursing funds. Where there is a property interest of a sanctions target under a blocking program, the property must be blocked. Beneficiaries include, but are not limited to, trustees, children, spouses, non-spouses, entities and powers of attorney. [12-04-2006]
1) Taken to its logical conclusion, OFAC's interpretation of the breadth of "interest" in property, which includes "contingent" future interests that need not even be legally cognizable property interests, could extend to all heirs to the property of any person. For practical purposes, however, OFAC has not (as of at least 12/2020) issued guidance suggesting that the scope of "interest" extends to reach non-named beneficiaries by operation of law, and instead appears to expect the regulated community to look at named beneficiaries, signatories, etc. on accounts.
2) When a blocked person has an "interest" in an account as a beneficiary, the entire account is blockable, not just the pro-rata share of the beneficiary.