OFAC Extends Recordkeeping Requirements from Five to 10 Years; Issues Paperwork Reduction Act Request for Comments

On September 11, 2024, OFAC announced its Interim Final Rule to Extend Recordkeeping Requirements from Five to 10 Years. The Interim Final Rule (IFR) was published in the Federal Register on September 13, 2024. Public comments on the IFR are due by October 13, 2024, following the instructions outlined in the Federal Register notice. Unless the IFR is modified as part of that public comment process, the new requirements set out in the IFR will take effect on March 12, 2025.

As widely expected following the April 24, 2024 amendments to the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) that extended the statute of limitations for violations of most of OFAC’s sanctions programs from five to 10 years, and as previewed by OFAC in related guidance, the IFR amends OFAC’s Reporting, Procedures, and Penalties Regulations (RPPR) by implementing a parallel extension to OFAC’s recordkeeping requirements. The RPPR requires that every person engaging in transactions subject to OFAC’s sanctions programs keep a full and accurate record of each such transaction. The IFR amends §501.601 of the RPPR to require that such records be available for a period of 10 years.

The IFR also extends to 10 years the period for which those relying on the OFAC general license to provide certain travel services to Cuba must retain customer certifications indicating the applicable general license authorizing each customer’s travel to Cuba. See 31 C.F.R. § 515.572.

Lastly, the IFR extends the period during which civil monetary penalties may accrue for late filing of reports required to be submitted to OFAC, e.g., blocked property and reject reports or reporting required under specific licenses, to 10 years. The potential penalty amounts remain unchanged.

Although the IFR may be viewed as a natural extension of the changes to the IEEPA and TWEA statutes of limitations, the doubling of the duration of the RPPR recordkeeping requirements in particular is expected to draw public comment from private industry groups and participants. For example, the American Bankers Association had previously requested that OFAC provide advance notice of the changes implemented by the IFR, “given that current bank policies, procedures, and operations are all developed in reliance on the current minimum five-year standard.” Financial institutions and other companies—at all levels of commercial sophistication—will likely face administrative, systems integration, and financial hurdles as they adjust their record retention infrastructure to comply with the IFR’s new requirements.

In parallel with OFAC’s issuance of the IFR, OFAC also published a 60-day request for comments in the Federal Register relating to its information collection activities, including the extended recordkeeping requirement to be imposed under the IFR. The Paperwork Reduction Act of 1995—a law that was designed to reduce regulatory reporting and paperwork burdens on the public—requires agencies, such as OFAC, that collect information from the public to obtain approval from Office of Management and Budget (OMB) before effecting such collections of information. When approval is granted, an “OMB control number” is assigned for that agency’s information collection request (ICR).

OFAC has historically maintained several distinct OMB-approved ICRs for the various information collection requirements under its regulations (e.g., the requirements to submit reports on blocked property and certain rejected transactions, to furnish information requested by OFAC under its subpoena authority, or to report certain information to OFAC under various general licenses). ICRs are only approved for a period of time, so agencies are required to routinely extend their approved ICRs, and also are required to request approval for amendments to approved ICRs when there are certain modifications to the information collections that would impact the burden on the public.  In the amended ICR with respect to which OFAC is now seeking public comments, OFAC is (i) consolidating most of its existing approved ICRs under OFAC’s main ICR/OMB control number (the control number that contains approval for most of OFAC’s information collections), and (ii) updating its burden estimates in light of this consolidation, as well as certain shifts in the sanctions landscape that impact the burden estimates under the ICR (e.g., the change to the 10-year recordkeeping requirement, the impact of the proliferation of sanctions in connection with Russia’s war in Ukraine, and the issuance of a new form to implement a new statutory reporting requirement under the Rebuilding Economic Prosperity and Opportunity (REPO) for Ukrainians Act).

While OFAC doesn’t usually publicize OMB ICR Federal Register notices on its website, as it has done here, putting more focus on the ICR process, the actual publication of these comment notices for extensions and modifications of existing ICRs is routine and occurs periodically in the normal course. Parties that wish to comment on OFAC’s burden estimates for the revised and combined ICR should submit comments by November 13, 2024, following the instructions outlined in the Federal Register notice.

The MoFo National Security team stands ready to help you assess your risks and answer any compliance questions spurred by these developments.