On July 22, 2024, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued guidance (Guidance) relating to the application of the new statute of limitations for violations of OFAC sanctions provisions and certain specific export restrictions codified in the emergency supplemental foreign assistance package, the 21st Century Peace through Strength Act (Emergency Supplemental Appropriations, Pub. L. No. 118-50, Div. D, 138 Stat. 895, 931 (2024)), which President Biden signed into law on April 24, 2024.
In addition to emergency security assistance and foreign aid, that legislation provides an array of security and trade-related provisions, including new sanctions authority, trade restrictions relating to China and Iran, new sanctions designations on individuals, and other authorities (see Phillips Lytle alert, “Security Aid Legislation Expands Sanctions Authorities ― and Exposure,” May 2, 2024). Among the most notable of these “collateral” provisions, however, was the extension of the statute of limitations for civil and criminal violations of the International Emergency Economic Powers Act (IEEPA) and the Trading With the Enemy Act (TWEA) from five (5) years to 10 years. The IEEPA is the underlying authority for the sanctions administered by OFAC; TWEA authorizes the U.S. Department of Commerce-enforced restrictions on trade with Cuba.
OFAC’s Guidance now clarifies that the new 10-year statute (50 U.S.C. §§ 1705(d) and 4315(d)), which became effective upon President Biden’s signature on April 24, applies to “any violation that was not time-barred at the time of its enactment” or five or more years prior to the effective date of the legislation. Accordingly, the Guidance states that OFAC may now commence an enforcement action for civil violations of IEEPA/TWEA-based sanctions within 10 years of the latest date of the violation “if such date was after April 24, 2019.”
Our prior alert noted that “… records retention policies will need to be revised to reflect this extended timeline.” In fact, the Guidance addresses this directly, indicating that OFAC intends to publish an interim final rule revising the recordkeeping requirements of 31 C.F.R. § 501.601. That regulation sets out the recordkeeping obligations for compliance with sanctions and trade regulations, stating that every person subject to U.S. laws “shall keep a full and accurate record of each such transaction” regardless of whether pursuant to a license or otherwise; and the same applies to holders of property blocked under the regulations. 31 C.F.R. § 501.601 (2024). Consistent with the new statute, the interim rule will extend the current five-year period for maintaining such records to 10 years, effective six months from publication of the rule.
This doubling of the period of potential exposure for companies involved in international trade should prompt an immediate and thorough review of internal controls and export compliance programs and, in particular, a revision and strengthening of records retention practices. For prospective counterparties, joint venture partners, capital investors, insurers and lenders, the necessity and extent of due diligence has been proportionately increased and deepened. Companies involved in international business, and those considering engaging in potential transactions (investment or otherwise) with those that are, should consider consulting with counsel carefully to review (and, if necessary, revise) compliance policies, diligence strategies and transaction documents in light of these new requirements ―and potential risks.
For more information regarding this legislation, or other trade law matters, please contact James Kevin Wholey at (202) 617-2714, jwholey@phillipslytle.com; any member of the Phillips Lytle International Business Law Team; or the Phillips Lytle attorney with whom you have a relationship.
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