OFAC Delisting: Removal from the SDN List

By Dr. Julius Hagen, Attorney at Law

When removal from the list may be possible

An SDN designation prevents payments, banks end business relationships or assets remain frozen. Delisting can remove the basis for those restrictions. The petition must explain why the sanction lacks a sufficient basis or why the circumstances that led to it no longer apply. 31 CFR § 501.807 provides for these two grounds.

Commercial harm alone does not replace that explanation. Relevant questions include whether OFAC attributed the conduct to the correct person, whether a sanctioned business relationship has ended or whether the petitioner has left the role on which the designation was based. Someone whom a bank has merely confused with a different sanctioned person first needs to resolve the screening match.

What is the designation based on?

List entries and press releases often identify the sanctions programme and some allegations, without disclosing all the evidence. Listed persons can request a Courtesy Document from OFAC. It identifies unclassified, non-privileged information underlying the determination. Parts may remain redacted; this is not a promise of access to the complete file.

We compare that information with corporate records, contracts, payment documents and the chronology. If OFAC relies on several legal authorities or designation criteria, the petition must address each one. Disproving one business relationship will not be enough if another independent ground for designation remains.

Which changes can support removal?

A change in circumstances must affect the particular ground for designation. A documented resignation may matter where the sanction was based on the position held. The cessation of sanctioned activity must be supported by business records. Where ownership is in issue, the actual interests before and after a transfer need to be established.

Renaming a company or changing its structure on paper does not remove a designation. Even a substantive reorganisation must be checked for legality before it is carried out: transferring blocked assets may itself be prohibited or require a licence. Remedial measures should therefore be coordinated with the petition and, where appropriate, with OFAC. A proposed change must not be described in the petition as already completed.

How the OFAC procedure works

OFAC provides a Reconsideration Portal for new petitions. They require details of the sanctioned person, the entry and the representative's authority, together with arguments and evidence. OFAC's current submission instructions should be checked when filing.

OFAC first checks completeness and assigns a Petition ID. Questionnaires or requests for further information may follow. Response deadlines must be met or an extension requested in time. Incomplete, inconsistent or false information can lead to refusal. The procedural rule does not set a fixed deadline for OFAC to decide whether to remove the designation.

What remains blocked during the review?

Filing a petition does not lift the sanctions. Permission for individual payments or other transactions must be considered separately. An OFAC licence may authorise a particular transaction without removing the list entry. It is therefore not a substitute for delisting.

After removal, banks and screening providers should be given evidence of which entry has been removed. Other grounds for sanctions may remain. Whether a bank resumes a former business relationship or a terminated contract must continue depends on the remaining legal restrictions and the particular contract.

If OFAC refuses the petition

OFAC FAQ 1261 permits a further petition. It must contain new arguments or evidence that could justify a different decision. An unchanged application may be refused by reference to the previous determination. We therefore examine the reasons for refusal and identify arguments or documents not previously presented.

Judicial review in the United States may also be available. The Administrative Procedure Act sets out standards for reviewing agency action in 5 USC § 706. US litigation counsel can assess whether a claim can be brought, which decision should be challenged and whether further administrative steps would help. The appropriate sequence depends on the case.

Our work on the petition

We establish the facts from the documents, examine each ground for designation and draft the petition. Statements about ownership, positions held or business relationships are tied to the relevant evidence. We work through OFAC's follow-up questions with you and involve US counsel where US advice or litigation is required.

We also address immediate issues with banks or counterparties. Statements made in those matters must be consistent with the petition. Where an account has been closed, we consider legal remedies in the EU.