Economic and trade sanctions have become a favored geopolitical tool for some Governments.
It is crucial for businesses operating internationally to consider and prepare for the potential impact of sanctions on their operations. Proper risk management and strategic decision-making are necessary to ensure safe and sustainable business practices in such scenarios.
Tornaritis Law, in partnership with a U.S. OFAC specialist,is recognized as a leading law firm for fearlessly helping clients win lawsuits, resolve disputes, and solve complex problems, together with our U.S. partner advice on a wide range of Cypriot and global clientele on economic sanctions and removal process.
Asset Freeze
Most U.S. and E.U. sanctions programs have as one component the freeze of the assets of specificdesignated individuals or entities. Over many decades, asset freezing has been a tool to impose economic pressure on the targets of sanctions, to ensure that funds and other assets of targeted persons located in the country imposing sanctions could not be used to fund harmful activities and to build up a body of frozen assets to be used as a bargaining chip in any ultimate settlement of a dispute with the targeted persons under the sanctions.
Generally, an asset freeze immediately imposes an across-the-board prohibition on transfers or dealings of any kind concerning the property. Legal title to the frozen assets typically remains with the targeted person, but the persons in possession or control of those assets are prohibited from turning them over or making them available to the targeted person. In other words, the targeted person cannot exercise their normal powers and privileges associated with ownership of the frozen assets without authorization from the relevant sanctionsregulator. Again, Tornaritis Law and partners can advise you.
The power and integrity of the Office of Foreign Assets Control (OFAC) sanctions derive not only from its ability to designate and add persons to the Specially Designated Nationals and Blocked Persons List (SDN List), but also from its willingness to remove persons from the SDN List consistent with the law.
What do European sanctions on individuals and entities mean in practice?
European Sanctions on individuals consist of travel bans and asset freezes. Sanctions on entities consist of asset freezes.
Travel bans prevent listed individuals from entering or transiting through E.U. territory by either land, air, or sea. Asset freezes mean that all accounts belonging to the listed persons and entities in E.U. banks are frozen. It is also prohibited to make any funds or assets directly or indirectly available to them.
What’s the process of seizing an asset?
The individual/company still technically owns their properties and assets but cannot sell or transfer them.
The next step in the U.S. and most European countries involves maybe proving the sanctioned individuals and companies’ criminal actions in court. In the U.S., litigators have to prove that assets were either directly used to commit a crime or were bought or maintained using criminally acquired funds. From there, governments can sell the assets as their own. But it’s a notoriously lengthy process.
To speed things up, some U.S. lawmakers have proposed a shortcut: Congress is currently formulating a bill that would let authorities seize any $5+ million property owned by a sanctioned Russian elite, sell it, and send the profits to Ukraine. It’s called the “Yachts for Ukraine Act.”
Understanding U.S. sanctions
Many international banks and insurance companies take a ‘deemed U.S. person’ approach to compliance. This means it is their policy that all of their U.S. and non-US affiliates comply with U.S. sanctions as if they were U.S.persons. Because of this, even non-US companies mustunderstand the scope of U.S. sanctions when engaging in financings, capital markets transactions, trade finance,or other transactions involving a major international bank, even if the company is not required to comply with U.S.sanctions.
This doesn’t mean non-US companies must comply with U.S. sanctions when the sanctions do not apply to them;instead, it’s a way to be prepared for and to understand their banks’ and insurance companies’ concerns.
What are the immediate steps?
Contact us to advise you on the next steps.
How can you remove U.S. sanctions?
The process of lifting U.S. sanctions can differ depending on how they were imposed. For example, if the President imposed them through general authority, they could be lifted quickly through the same means.
We start with a Request for Administrative Reconsideration is typically the first step in starting the removal process with Office of Foreign Assets Control. The request is called a Petition for Removal, and it is likely the most significant filing you will provide to OFAC in your case.
After submitting this petition, OFAC may submit a follow-up questionnaire to you or your company. Whether they do this depends on the information the subject will provide they possess relevant to the information and arguments you put in your petition.
Unfortunately, OFAC’s response time to the petition for removal is not fast. OFAC may take 3-30 months to respond to any petition or request related to your removal from the SDN List. From our previous experience with one of our clients took around 9 months toberemoved.
Tornaritis Law and partners have the skills, experience, and expertise in conducting internal investigations to identify such mistakes and also advise and create proposals—such as corporate restructuring, governance,accountability, and or personnel changes —to include in applications for removal to OFAC. Tornaritis Law Firm and our U.S. partner have successfully caused the removal of individuals/entities from the SDN list.
Is the sanctioned person obliged to appear before a judge for the removal process?
The recommended first step for removal from the SDN (Specially Designated National) List does not involve criminal or civil proceedings. Since it is an administrative matter, adjudication occurs on the agency level at the Treasury Department’s Office of Foreign Assets Control (OFAC).
After submitting your petition for removal, OFAC may respond with a questionnaire and ask to meet you in person for further questions. Once OFAC receives your responses to the questionnaire, the OFAC enforcement officer assigned to your case will compare your answers with the evidence compiled on the record before deciding on the requested SDN List removal.
Petitioners can file a lawsuit challenging their designation either instead of petitioning OFAC through the administrative process or after having been denied their request for removal from OFAC’s SDN List. Already some they start legal actions.
How long will take the removal process?
The process of getting removed from the SDN list is a long and strenuous process that requires a great deal of patience. Submission of your petition for removal is followed by a long wait period spanning from 3-30 months. From our previous experience with one of our clients took around 9 months tobe removed.
What happens if the petition for removal is denied?
We can reapply using the same process as the original petition. You will need to present new arguments and evidence.
Can Cyprus-sanctioned companies and individuals get a special license to pay their employees and company expenses?
Yes, there are two phases with OFAC regarding these sanctions:
(1) the licenses for persons and or businesses to be able to continue to conduct business (this allows limited access to otherwise blocked accounts and also for commercial transactions for essential services depending on the facts and the urgent needs such as mass layoffs of workers, environmental damage, humanitarian reasons, financial stability to a project or certain goods needed for relief, etc.);
(2) De-listing process (this is the actual application we file with facts and procedures to show a plan to U.S.Treasury that there is a change in conduct and new compliance systems etc., are being implemented with guidance from our U.S. partners to avoid the problems that caused the initial sanctions.
Do the banks need permission to be able to make payments?
We will send a formal letter from our firm to the banks explaining the process and giving them comfort to enable certain transactions. For example, any non-US dollar transaction, any transaction that does not involve a U.S. person or U.S. business, etc. We will assist them in getting the approvals from OFAC.
If you believe that companies and persons will be included in OFAC lists, we can help.
If they want to avoid the sanction, we can do a self-report which is very helpful and requires an investigation and disclosure of all the incorrect data and must be done in meetings we set up at OFAC in D.C.
How can we help?
For more information, contact us at criton@tornaritislaw.com for a meeting