The United States Dollar is the main currency in international trade. If a US correspondent bank were to block or freezer your account, this would cause significant damage to your business.
One common reason for blocking a transaction or an account is that the bank considers them to fall under US sanctions. However, out of abundance of caution, banks often block accounts where they are not required to do so by the sanctions. Your account may be blocked because your name is similar to a person on the US sanctions list, or it may be blocked because the bank has misunderstood the scope of the applicable sanctions.
What do you do if your account is blocked?
Firstly, you need to determine the likely legal basis for the bank’s actions. The starting point should be an appraisal of the executive orders issued by the Office of Foreign Assets Control (OFAC) and any corresponding directives, licenses and exemptions. If, on careful review, it appears the funds were wrongly frozen, a formal request should be made to the bank to unblock the funds in question and to return the same. The request should provide a detailed explanation as to why the funds should not have been frozen, based on the relevant legislation/orders. Banks are generally (and understandably) very cautious in ensuring compliance with any sanctions, as a result of which they will be reluctant to release any frozen funds unless entirely satisfied that to do so will not expose them to any risk of breach of sanctions.
Secondly, if the bank does not release the funds, but fails to provide an adequate explanation as to why the funds have been frozen, you may want to write to OFAC and ask them to confirm that the transaction in question or the person in question is not subject to any sanctions, or that such sanctions as there are do not result in the automatic blocking of an account. Here, likewise, the request should analyse any applicable legislation/orders on sanctions.
Thirdly, if it turns out that your transaction is caught by sanctions, then you may still get your funds back by applying for a licence from OFAC. The application may be submitted in a prescribed form online or in hard copy. For more details, visit https://home.treasury.gov/policy-issues/financial-sanctions/ofac-license-application-page. If you are not satisfied with the outcome of your license application, you may ask OFAC to reconsider it (on the basis of new facts or evidence which could not have been made available to OFAC earlier) or you may challenge their decision in Federal Court.
We have encountered numerous cases of blocking of bank accounts or transactions by US correspondent banks since Russia’s unlawful annexation of Crimea in 2014. Even more accounts are being frozen in view of the new sanctions introduced upon Russia’s full scale invasion of Ukraine in February 2022.
Fortior Law has two New York qualified attorneys who can assist you with analysing the relevant sanctions provisions, corresponding with OFAC and filing licence applications on your behalf. Should the need arise, we can engage New York based litigation attorneys on your behalf to release your funds.
For more information, get in touch with Dmitry Zagorodnyuk ([email protected]) and Giles Xuereb ([email protected]) or your usual contact at Fortior.