August 22, 2003
The Office of Foreign Assets Control (OFAC), part of the Department of the Treasury, enforces economic sanctions against certain foreign countries, terrorists, international narcotics traffickers, and others. These sanctions, which include Executive Order 13224, prohibit unauthorized transactions and freeze assets under U.S. jurisdiction. As part of its enforcement efforts, OFAC publishes a list of individuals, groups, and entities that are subject to these sanctions. These persons are collectively called "Specially Designated Nationals"or "SDN's."Their assets must be blocked, and all persons and entities subject to the jurisdiction of the United States are required by law to refrain from any transactions or dealings with them. Everyone in the United States, including real estate settlement providers, must take steps to guard against engaging in any prohibited transactions or dealings with SDN's.
OFAC has issued interim final regulations to enforce the prohibitions of Executive Order 13224. See 68 Fed Reg. 34196 (June 6, 2003).Among other things, these regulations make it clear that any prohibited transaction with a SDN is void, unless OFAC elects to permit the transaction. See 31 C.F.R. 594.202(a). Title companies and mortgage lenders should be aware that such transactions are presumptively void. OFAC may determine that that transaction is not void if the person involved can demonstrate that the violation was not willful and that the person did not have reasonable cause to know or suspect that the transaction was prohibited. See 31 C.F.R. 594.202(d).
The interim final regulations also provide that except to the extent otherwise provided by law or unless licensed pursuant to this part, any attachment, judgment, decree, lien, execution, garnishment, or other judicial process is null and void with respect to any blocked property. See 31 C.F.R. 594.202(d).