Do Manufacturers Have to Report All Iranian Sales Inquiries to OFAC or Only Those They Have Formally Rejected?
Treasury Issues New Guidance Regarding June 21, 2019 Amendment to the Reporting, Procedures, and Penalties Regulations (“RPPR”)In late February, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) published additional guidance regarding the June 21, 2019 amendment to OFAC’s Reporting, Procedures, and Penalties Regulations (“RPPR”). That guidance caused a stir among manufacturing company compliance personnel and others because it appeared to imply that unsolicited sales inquiries and other contacts from Iranian companies or government entities might require submission of a report to OFAC whether those inquiries were formally rejected or not.
OFAC clarifies that as of June 21, 2019, when the changes to the RPPR took effect, they expected all U.S. persons and persons otherwise subject to U.S. jurisdiction, including entities that are not U.S. financial institutions, to comply fully with all requirements of the RPPR, including the requirement to report rejected transactions within 10 business days of the rejected transaction. (Note: Prior to June 21, 2019, only U.S. financial institutions were required to submit reports to OFAC for rejected funds transfers). Rejection reports must be submitted to OFAC using their Report of Rejected Transaction Form.
The June 21, 2019 changes incorporated new requirements for parties filing reports on blocked property, unblocked property, or rejected transactions. The rule requires more information in blocked property reports in order to prevent multiple requests from OFAC for additional information. Additionally, rejection and blocked transaction reports can be submitted electronically pursuant to the regulations as well as by email, U.S. mail, or other official reporting options. The rule includes information on OFAC’s electronic license application procedures and provides additional instructions regarding applications for the release of blocked funds.
The new guidance does not clarify, however, when a sales inquiry qualifies as a “rejected” transaction that requires reporting. This leaves open the question of whether a company that simply remains silent after receiving a purchase inquiry from a reportable entity has rejected the transaction or not. The agency did state that it does not expect companies to seek further information solely to complete the report to the agency. Instead, OFAC expects the reporting company to provide all information required by the RPPR that is in the reporter’s possession.
OFAC states that they continue to review the comments related to this rule change and they welcome further feedback via Compliance Division by email at: [email protected] as to whether any clarification or modification to the rule is needed.