31 CFR § 542.305 Entity.

Date issued: May. 02 2014

Last substantive commentary amendment:
Aug. 19 2023

TURBOFAC Commentary (308 words)

Notes:

* Provision redesignated on 6-5-24 to accommodate additions to the definitions subpart of the SySR (what was 542.303 is now 542.305).

1) This is the standard definition of "Entity," common to most sanctions programs. Read in conjunction with the definition of "Person" and "U.S. Person." For commentary on one instance in which the scope of the term made a material difference in the outcome of a case, see Consolidated Commentary on the 2015 Schlumberger Penalties, the B Whale Corporation Case and the Scope of the Term “U.S. Person” (System Ed. Note). OFAC (or the DOJ) could have considered a large, U.S.-headquartered "business segment" of a non-U.S. incorporated company to constitute an "entity" within the meaning of the applicable definition, thereby rendering it a "U.S. person" as a result of it being a “person in the United States.” This would have subjected the worldwide operations of that “business segment” to most primary sanctions prohibitions. This was not the position taken, however.

2) Contrast e.g. Case No. IA-2012-297129-1 (a cooperative, unincorporated association treated as a "U.S. person" entity whose foreign affiliates were persons owned or controlled by U.S. persons.")

3) See Case No. SDGT-1051, suggesting that while a branch of a U.S. person is part of the "U.S. person" of which it is a branch, it is not the case that branches and parent entities are always treated as if they are the same "entity". More specifically, a blocked branch of an entity and the main office of the branch are separate entities, such that the branch can be blocked without that having the effect of blocking the entity of which the branch is a branch.

4) See Case ID: CYBER2-28475 - Tornado Cash Redesignation (Evidentiary Memorandum) for a particularly broad/notable construction of the standard regulatory definition of the term “entity”.