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Compliance

Export Controls—Office of Foreign Assets Control (OFAC) Regulations

I. PURPOSE

Export controls in the United States are intended, in part, to prevent the export of certain commodities to nations that have been determined to be involved in or directly supporting acts of international terrorism. The most relevant U.S. export controls are grouped into three sets of federal regulations:

  1. The Office of Foreign Assets Control (OFAC) regulations (Treasury Department)
  2. The Export Administration Regulations (EAR) (Commerce Department)
  3. The International Traffic in Arms Regulations (ITAR) (State Department)

EAR and ITAR are outside the scope of this memo, which focuses on OFAC regulations. Through these regulations, the OFAC administers and enforces economic and trade sanctions against targeted foreign countries and regimes, terrorists, and those engaged in activities that pose a threat to the national security, foreign policy, or economy of the United States.

II. HISTORY

At the beginning of World War II, the Office of Foreign Funds Control was established to regulate U.S. trade sanctions placed on other nations. This office was succeeded by OFAC, which was created by President Harry Truman in 1950 (the height of the Korean War). Over the years, Congress has enacted and amended several statutes that govern export controls, including the Trading with the Enemy Act of 1917, the Foreign Assistance Act of 1961, and the Trade Sanctions Reform and Export Enhancement Act of 2000. These laws affect OFAC regulations as well as other export control regulations. To accommodate changing relations with foreign nations, the OFAC releases updated regulations many times per year.

III. APPLICABILITY TO BYU–HAWAII

All U.S. persons and entities must comply with OFAC regulations. Accordingly, universities located in the United States must closely monitor any travel to and from, or any interactions with, certain countries regulated by the OFAC (e.g., Syria, Cuba, North Korea, and Iran), in order to avoid any criminal liability. Because BYU–Hawaii is a university located within the United States, it must comply with OFAC regulations.

IV. REQUIREMENTS

U.S. individuals and entities must not engage in “prohibited transactions,” which are defined as “trade or financial transactions or other dealings” with certain countries or persons on the list of Specially Designated Nationals and Blocked Persons (SDN). The SDN is a list created by the OFAC of persons or groups that threaten national security. The OFAC does provide exceptions to the prohibitions through general or specific licenses, which authorize otherwise prohibited transactions. For example, when dealing with Cuba, Iran, and Sudan, it is generally permissible to publish research articles and to export existing, publicly available information.

There are a number of countries under the purview of OFAC that are embargoed, including Cuba, North Korea, Iran, and Syria. Each embargoed country may have substantive prohibitions and policies particular to that country’s economic sanctions program. Further, those sanctions may be comprehensive (broadly blocking assets and restricting trade) or selective (targeting specific activities or individuals). OFAC regulations prohibit U.S. persons from dealing with individuals on the SDN and their assets. In addition to specific sanctions for countries and individuals, there are standard licensing, reporting, and recordkeeping requirements that apply to interactions with any country embargoed under the OFAC regulations.

A. Licensing

In certain cases, exports to embargoed countries may be possible with the acquisition of a general or specific license. U.S. individuals or entities may operate under a general license, which authorizes certain types of transactions; for example, general licenses authorize particular types of transactions for a class of persons without the need to formally apply for a license. Additionally, U.S. individuals or entities may apply for specific licenses, which authorize certain transactions that are subject to OFAC regulations and that are not authorized by a general license. U.S. individuals and entities may obtain a general or specific license by submitting an application to OFAC and providing a description of the proposed transaction, including the names and addresses of any individuals or companies involved.

B. Reporting

The director of OFAC may require institutions to present certain reports on demand. If an institution attempts to initiate a transaction that is subsequently blocked pursuant to OFAC regulations, that institution must file a report regarding the blocked property or payment. These reports should describe the owner, the property, the property’s location, the property’s actual or estimated value, the date the property was blocked, and the holder’s contact information. All reports must be filed with OFAC’s Compliance Programs Division within ten business days of the property being blocked.

C. Recordkeeping

Individuals and entities must keep records for any transaction subject to OFAC regulations, regardless of whether that transaction was made under the authority of a license. These records must be available for examination for at least five years from the date of the transaction.

V. PENALTIES

Persons convicted of violating OFAC regulations may be fined between $1,000 and $250,000 per violation, depending on the value of the violating transaction. In appropriate circumstances, the OFAC may refer the matter to law enforcement officials for criminal investigation and possible prosecution.

VI. COMPLIANCE CALENDAR

Holders of blocked property and financial institutions that have funds in OFAC-targeted countries must file by September 30 of each year a comprehensive report on any and all blocked property or transactions held as of June 30 of the current year.

VII. RELATED MEMOS

Export Controls—Export Administration Regulations (EAR) (Regulations concerning the exportation of US originated items, including some information, requiring licenses and prohibiting certain end-uses and end-users.)

Export Controls—International Traffic in Arms Regulations (ITAR) (Regulations governing the export of defense materials and services, including technical data, weapons, and training.)