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February 14, 2008 

OFAC Issues Guidance on Entities Owned By Persons Whose Property And Interests In Property Are Blocked

The Treasury Department's Office of Foreign Assets Control (OFAC) today issued a document entitled "Guidance on Entities Owned By Persons Whose Property And Interests In Property Are Blocked." While this guidance applies to most of OFAC's sanctions programs, this guidance was sought by banks, exporters and importers as a result of numerous questions raised after OFAC issued a blocking order on November 13, 2007 against Belarus' Belneftekhim (commonly known as Belarusian State Concern for Oil and Chemistry) and its U.S. representative office, Belneftekhim USA.

Belneftekhim is the largest enterprise in Belarus and is the largest exporter of Belarusian products to the United States. Belneftekhim also manages operations for a large number of companies in Belarus.

OFAC's guidance states:

A person whose property and interests in propert are blocked pursuant to an Executive order or regulations administered by OFAC (a "block person" is considered to have an interest in all property and interests in property of an entity in which it owns, directly or indirectly, a 50% or greater interest. The property and interests of such an entity are blocked regardless of whether the entity itself is listed in the annex to an Executive order or other placed on OFAC's list of Specially Designated Nationals ("SDNs"). Accordingly, a U.S. person generally may not engage in any transactions with such an entity, unless authorized by OFAC. In certain OFAC sanctions programs (e.g. Cuba and Sudan), there is a broader category of entities whose property and interests in property are blocked based on, for example, ownership and control.
OFAC also noted that U.S. persons are "advised to act with caution when considering a transaction with a non-blocked entity in which a blocked person has a signficant ownership interest that is less than 50% or which a blocked person may control by means other than a majority ownership interest."

OFAC indicated that as regulations implementing new sanctions programs are issued, this guidance will be incorporated into those regulations and OFAC expects to amend existing sanctions programs to incorporate today's guidance into the implementing regulations.

The PDF version of OFAC's guidance can be found here.

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