OFAC Regulatory Provisions - 31 CFR § 598.202

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TURBOFAC Commentary (595 words)

*Note Common to Revised /NTSR

1) On 5-17-2021, OFAC made substantial amendments to two of its oldest sets of active sanctions regulations; the FNKSR (2000) and (1997).

The FNKSR blocking-related prohibitions were “modernized” so as to bring the text of the regulations in line with OFAC’s long standing interpretations of them. With the exception of Note 1 to paragraph (a), the current 598.202 now a standard blocking prohibition, as it appears in a non-abbreviated set of sanctions regulations. The scope of the basic blocking provision is generally interpreted harmoniously on a cross-programmatic basis. Refer to Notes Common to most "Prohibited transactions" and "Prohibited transactions involving blocked property" Provisions; an Introduction to the Basic Blocking Language (System Ed. Note), which serves as a jumping off point for other system notes dealing with the scope of basic blocking language in further detail.

Unlike most other provisions titled "Prohibited transactions involving blocked property," this provision does not refer to the FNKSR's "derivative designation" criteria, for which non-U.S. persons can be designated as a result of commercial transactions with entities and persons blocked pursuant to the FNKSR/FNKDA. For comments on the way in which OFAC can used (and has used) the "material assistance" and other "derivative designation" criteria listed here as "quasi secondary sanctions," see generally 598.314, comments thereto, and General Note on Secondary Sanctions and “Derivative Designation” Criteria; Identification of the Gap Between the Theoretical and Practical Scopes of Authorities Targeting Transactions with no U.S. Nexus; Enforcement Risk Management (System Ed. Note).

2) As discussed in General Note on the Applicability of /TWEA Exemptions in EOs and Sanctions Regulations not Specifically Mentioning Them (System Ed. Note), there are many sets of sanctions regulations that do not contain an “exempt transactions” provision but to which the standard exemptions nevertheless apply. This, however, is not one of them. The FNKSR implement the , which does not contain exemptions for travel and/or informational materials.

3) From their issuance in 2000 through 5-17-2021, the FNKSR contained a provision—FNKSR - Blocking of assets (2000-2021)—that set out a blocking prohibition applicable to certain “property and interests in property...which are owned or controlled by a specially designated narcotics trafficker.” This provision was unique to the FNKSR in that it referred to property “controlled” by a blocked person, rather than property in which a blocked person had an “interest.” 598.203 (removed and reserved in May, 2021) contains the standard language concerning property and interests in property of a blocked person.

The irregular structure of the provision was owed to the language of the FNKDA that the FNKSR implement. In theory, the provision might have been taken to mean that the 50% rule did not operate in the FNKSR in the way it operates for typical list-based blocking programs, e.g., such that the assets of an entity controlled by not owned by an may not be dealt in as a result of the control of the entity. In practice, this is not (and was not) how OFAC reads the blocking provision of the FNKDA. Instead, the provision appliances such that if an asset is "controlled' by an SDNTK, it is blocked because it is per se an asset in which the SDNTK has an "interest" (see e.g. Case No. FNK-2015-324389-1; Case No. FNK-2016-327936-1), but this is no different from how OFAC interprets all blocking prohibitions (see FAC No. -197443 - Holy Land Found. Blocking Notice).

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31 CFR § 598.202 - Prohibited transactions.

TURBOFAC Commentary (595 words)