New (and Extended) Statute of Limitations for Many Sanctions Violations Enforced by OFAC

At a Glance

• In April, President Biden signed legislation that extends the statute of limitations for civil and criminal violations of the International Emergency Economic Powers Act (IEEPA) or the Trading with the Enemy Act (TWEA) from five years to 10 years.
• New OFAC guidance states that the agency intends to apply the 10-year statute of limitations to any violation committed after April 24, 2019.
• OFAC also anticipates publishing an interim final rule extending certain recordkeeping requirements from five years to 10 years.

New OFAC Guidance on Statute of Limitations

On July 22, 2024, the Office of Foreign Assets Control (OFAC) published new guidance addressing how it intends to apply a recent change in the statute of limitations for various sanctions that it enforces. The guidance addresses the agency’s interpretation of Section 3111 of the 21st Century Peace through Strength Act, which extends the statute of limitations for civil and criminal violations of the International Emergency Economic Powers Act (IEEPA) or the Trading with the Enemy Act (TWEA) from five years to 10 years. See 50 U.S.C. §§1705(d) and 4315(d).

Under its new guidance, “OFAC may now commence an enforcement action for civil violations of IEEPA- or TWEA-based sanctions prohibitions within 10 years of the latest date of the violation if such date was after April 24, 2019.” Further, OFAC explained that the commencement of a civil enforcement action includes the issuance of a pre-penalty notice or a finding of violation.

Record Keeping Requirements

To align with the new statute of limitations period, OFAC also announced that it anticipates publishing an interim final rule, with an opportunity to provide comment, extending the recordkeeping requirements codified at 31 C.F.R. § 501.601 from five years to 10 years. The new recordkeeping requirement will likely become effective six months after publication of the interim final rule.

Implications for Businesses

IEEPA and TWEA are two of the most commonly used sanctions authorities enforced by OFAC. Accordingly, the extension of the statute of limitations could have broad implications for businesses that engage or attempt to engage in certain unauthorized transactions with sanctioned entities and foreign countries. It also demonstrates that OFAC intends to use the revised statute of limitations retroactively to address violations that would otherwise been barred under the previous statute of limitations.

Both statutes have civil and criminal penalties. Under IEEPA, civil fines can be imposed up to $368,136 or twice the amount of the transaction, whichever is greater. Civil penalties under TWEA are determined based on the nature and extent of the violation and can go up to $108,489. Additionally, criminal fines up to $1,000,000 are available under both statutes, with up to 20 years of imprisonment for willful violations of IEEPA and 10 years of imprisonment for willful violations of TWEA.

In the short term, businesses will want to adjust their record keeping requirements for transactions with certain entities going back to April 24, 2019. Such records will now need to be retained for 10 years, as opposed to five, subject to further details to be announced by OFAC in its forthcoming interim final rule.

We also expect challenges to OFAC’s guidance insofar as it purports to extend the statute of limitations to violations of IEEPA and TWEA committed before the date of enactment of the 21st Century Peace through Strength Act. The Supreme Court has held that an amendment to current law is generally presumed to have prospective effect only unless there is a clear statutory expression of Congress for the amendment to apply retroactively, which is absent from Section 3111 of the 21st Century Peace through Strength Act. See Landgraf v. USI Film Prods., 511 U.S. 244 (1994). Absent such congressional intent, the retroactive application of an amendment will only be applied if the amendment is determined to be procedural rather than substantive in nature.

Finally, we note that the Department of Commerce’s Bureau of Industry and Security (BIS) has not made any official comments concerning its five-year statute of limitations nor five-year record keeping policy.  Nonetheless, certain provisions of the Export Administration Regulations (EAR) are authorized under IEEPA. Therefore, the export community is anxiously awaiting guidance on how these changes to IEEPA may impact BIS enforcement actions.