A U.S. financial institution, its foreign branches, and — in some cases — its wholly-owned or -controlled foreign subsidiaries, cannot open an account for a person named on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List) or a person who is otherwise blocked (e.g., a blocked government or an entity that is subject to the 50 Percent Rule). This is a prohibited service. However, the institution or its affiliates should pay careful attention to ensure the person trying to open the account is the same person as the one named on OFAC’s SDN List or is otherwise subject to blocking. In many cases, an institution may identify a “false positive,” where the name is similar to a sanctioned person’s name, but the rest of the information provided by the applicant does not match the descriptor information on OFAC’s SDN List. If a U.S. financial institution does come into the possession or control of any property in which a blocked person has an interest, the U.S. financial institution is obligated to block that property. In other words, if you receive an application to open an account from a person who matches the information on the SDN List, together with an opening deposit, you are obligated to block the funds. The same is true for other banking transactions. If, for example, a customer asks if he or she is allowed to send money to a relative’s account with Bank of XYZ, which appears on the SDN List, the bank can say “no, that’s illegal.” If, on the other hand, a bank receives instructions from its customer to debit his or her account and send the funds to Bank of XYZ, the bank must act on the instructions by blocking the funds that contain a future interest of the SDN bank. You might think of the analogy of a bouncing ball. Once the ball starts moving, you must stop it if it comes into your possession.
August 11, 2020