The Office of Foreign Assets Control (OFAC) is responsible for ensuring that funds derived from illegal foreign activities are not invested in domestic institutions and enterprises in the United States. It works to satisfy this mandate through various means, including the administration of various economic and trade sanctions programs. These sanctions are based on U.S. foreign policy and national security against targeted foreign countries and regimes, terrorists, international narcotics traffickers and others engaged in illegal activites. The most well-known of these programs is the Specially Designated Nationals and Blocked Persons List, also known as the OFAC SDN List. 

Once OFAC places a person on the SDN List, getting off of the list can be challenging. When seeking SDN List removal, foreign nationals must have a specific (and valid) reason for requesting that OFAC reverse its prior decision. While there are several grounds for seeking the removal of OFAC sanctions, these grounds are all fact-specific, and filing a successful petition for removal requires an intimate understanding of OFAC’s rules, procedures, and priorities.

Placement on OFAC’s SDN List can have substantial business and financial consequences for foreign companies and individuals. While it is possible to successfully request removal from the SDN List in many cases, seeking termination of OFAC sanctions requires an informed, strategic, and forward-thinking approach.

Procedures and Strategic Considerations for Seeking Removal from OFAC’s SDN List

If you need to seek removal from the SDN List (or if one of your clients needs to file a petition for removal of OFAC sanctions), what do you need to know to get started? Here is an overview of the key procedural aspects and some strategic considerations involved in seeking removal from OFAC’s SDN List: 

1. Filing a Request for Removal with OFAC

Seeking removal from the SDN List is an administrative procedure that involves dealing with OFAC directly. While seeking judicial relief is an option in some circumstances, getting out from under OFAC sanctions usually starts with filing a request for removal with the Office. 

OFAC’s guidance for the contents a request for removal is relatively scant—consisting entirely of the following: 

• “The listed person’s name and contact person’s name and mailing address (including email address);

• “The date of the relevant OFAC listing action (such as the designation or identification); and

• “A request for the reconsideration of OFAC’s determination, including a detailed description of why the listed person should be removed.”

However, this relatively basic set of instructions should not be interpreted as signifying that filing a request for removal is a simple or straightforward process. Drafting a petition for removal requires a comprehensive understanding of (i) the grounds for the sanctioned person’s listing, (ii) the available grounds for seeking removal, and (iii) the facts and legal arguments that OFAC is generally willing to consider when entertaining requests for removal. 

2. Identifying the Grounds for Removal from the SDN List

While filing a request for removal is an administrative procedure, OFAC does not grant removals as a matter of course. Persons seeking removal must have a valid basis for doing so, and they must affirmatively and effectively demonstrate that the imposition of OFAC sanctions either (i) was never warranted, or (ii) is no longer warranted. Some of the primary grounds for seeking removal from the SDN List (as identified by OFAC) are: 

• Mistaken identity;

• The basis for the designation no longer exists (change in circumstances); or, 

• “[A] positive change in behavior.”

Although mistaken identity is generally the easiest of the grounds to prove, it is also the least common. In most cases, blocked persons seeking removal from the SDN List will need to focus on either (or both) of the other grounds listed above. This is often a time-intensive process that requires evidence of a significant change such as: 

• A change in geopolitical circumstances, a shift in U.S. foreign policy, or elimination of the national security risks that underpinned the blocked person’s SDN listing; 

• Terminating the business relationships or ties to foreign interests that triggered the person’s SDN listing; or, 

• Restructuring corporate entities, closing foreign accounts, and/or taking other steps with the specific goal of achieving SDN List removal. 

In all cases, when seeking removal from OFAC’s SDN List, thorough documentation is essential. Blocked persons must work closely with their counsel to gather all pertinent records, and then counsel must assemble a documentation package that supports the person’s request for removal—while still preserving the attorney-client privilege and addressing all other pertinent legal considerations. 

3. Requesting OFAC’s Justification for Sanctioning the Blocked Person

If it is not clear why a blocked person is on the SDN List, the blocked person (or the blocked person’s counsel) can submit a Request for Administrative Records to OFAC to obtain the memorandum and evidence on which OFAC based its decision. While this adds to the timeline (and while portions of these records may be redacted due to classified information), it can be an essential step for formulating an effective request for removal. 

4. Requesting a Meeting and Working with OFAC

When submitting a request for removal from the SDN List, blocked persons and their counsel have the option to request a meeting with OFAC. However, as noted in 31 CFR § 501.807(c), “such meetings are not required, and the office may, at its discretion, decline to conduct such meetings prior to completing a review pursuant to this section.” 

As a result, while a meeting might seem like the easiest way to explain the circumstances or work through a complicated set of issues with OFAC, blocked persons and their counsel should not rely on getting a meeting. Instead, they should devote the time, effort, and resources necessary to draft a clear and compelling request, and they should submit a well-organized and clearly-labeled set of exhibits that support their stated grounds for removal. Oftentimes, rather than causing OFAC to grant a meeting request, a poorly-drafted or unsubstantiated request for removal will simply result in a denial. 

Regardless of whether OFAC grants a meeting request, it has the authority to request “clarifying, corroborating, or other additional information,” as it deems necessary. Ideally, blocked persons and their counsel will submit all of the information OFAC needs to render a favorable decision with their request for removal. If OFAC requests additional information, blocked persons and their counsel should respond promptly, as unnecessary delays will only serve to further draw out the process. 

5. Working Collaboratively with OFAC 

Generally, seeking removal from the SDN List should be viewed as a collaborative process. Working with—rather than against—OFAC will afford the greatest opportunity for a favorable resolution in most cases. As noted above, while OFAC can grant meetings and request additional information, it can also choose to deny insufficient requests for removal. Taking a collaborative approach that signals the blocked person’s willingness to work with OFAC will help maximize the chances of OFAC making an effort to resolve any open questions rather than simply moving on to the next application. 

Taking a collaborative approach can help set the stage for favorably resolving any future interactions with OFAC as well. In many cases, successfully filing for removal from the SDN List will not be a blocked person’s last encounter with OFAC. Establishing a good working relationship can be crucial; and, when domestic banks or companies inquire with OFAC about doing business with the blocked person or obtaining the release of the blocked person’s assets, having a favorable history can help with this as well. 

6. Challenging OFAC’s Final Agency Decision in Court 

While it is generally best to work collaboratively with OFAC when possible, once OFAC formally denies a request for removal from the SDN List, the blocked person’s only remaining option may be to go to court. A formal denial of a request for removal is considered a final agency decision, and this means that it is subject to review in federal district court. 

Challenges to final agency decisions in federal district court are governed by the Administrative Procedures Act (APA). Under the APA, potential grounds for challenging the denial of a request for removal from the SDN List include (but are not limited to): 

• Misinterpretation of governing laws or regulations;

• Erroneous conclusions of law; 

• Use of improper procedures; and 

• Arbitrary or capricious decision-making.

As the Shriver Center nicely summarizes, “due to the courts’ substantial deference to an agency’s interpretation of its governing statute and to its findings of fact, procedural challenges to an agency’s decision-making process may offer greater prospects for securing relief.” This is certainly the case when dealing with OFAC, as the nature of OFAC’s authority and the complexity of issues involved in OFAC sanction matters will often lead to deference on substantive matters. 

7. Dealing with Post-Removal Issues

Finally, when petitioning for removal from the SDN List, it is important for blocked persons and their counsel to proactively consider various post-removal issues as well. For example, even once a blocked person has secured removal, financial institutions and corporations may still be hesitant to deal with the blocked person out of an abundance of caution. Working with banks and companies proactively can help avoid (or at least mitigate) any post-removal delays in moving forward with desired transactions, investments, or business activities.