OFAC Regulatory Provisions - 31 CFR § 501.806 Procedures for unblocking funds believed to have been blocked due to mistaken identity.

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TURBOFAC Commentary (368 words)

***Update – on 5-8-24, OFAC published an “Interim final rule” announcing amendments to this provision and others, to be effective 90 days after its 5-10-24 publication in the FR. See the back of the PDF file for the Interim final rule and a redline comparing the current and pre-existing versions.

The differences between the revised and pre-existing versions are certain non-substantive technical changes; specifying that the provision applies to property in general, not just “funds”; specifying that the provision applies to removal from all OFAC-administered lists (not just the List); specifying that property other than “vessels” (e.g. aircraft) can be removed from the list; specifying that the petition should include an argument that the “circumstances resulting in the sanction no longer apply”.

On 10-7-24, OFAC issued FAQ # 1196, in which for the first time OFAC introduces a "do it yourself" alternative to the process articulated at 501.806 (see comments thereto and note that Case No. CU-2016-331352-1 suggests that where funds were improperly blocked because a authorizes the straight-through processing of the transfer, no separate OFAC license is required to either process the transaction (even if months after the initial instruction) or otherwise return the funds to the originator).

Note that the comments below have not yet been amended to reflect the issuance of the 5-8-24 Interim final rule and FAQ # 1196.

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Notes:

1) Note the difference between "mistaken identity," e.g. a person named Joaquin Guzman that is not the famous Mexican drug kingpin, and "mistaken identity" as in the funds were send to a person that we did not intend to send them to. In the latter cases, OFAC's practice appears be rather unforgiving See e.g. Case No. FNK-2016-333921-1 [Documents related to subsequent legal challenge in original PDF (Comercializadora Transpacifico, S.A. v. Mnuchin et al (1:17-cv-21807) (SDFL, 2017)) and Bank Soyuz v. Office of Foreign Assets Control, Case No. 1:05CV01073 (D.D.C.) (Complaint in action against OFAC resulting in release of frozen assets; OFAC correspondence reproduced), and comments thereto.

2) Provision amended in 2019 to specify that requests for unblocking of funds can be made electronically.

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31 CFR § 501.806 Procedures for unblocking funds believed to have been blocked due to mistaken identity (With Version Proposed in 5-8-24 Interim Final Rule)

TURBOFAC Commentary (368 words)